Fund raising by issuance of Debt Securities by Large Entities
Summary
This circular operationalizes the Union Budget announcement by mandating large listed entities to raise at least 25% of their incremental borrowings through debt securities. The framework applies to entities with significant outstanding long-term borrowing and high credit ratings, excluding scheduled commercial banks. Compliance involves specific disclosure requirements to stock exchanges and potential monetary penalties for shortfalls in meeting the borrowing norms. Annexure B2 prescribes the mandatory format for Large Corporates to disclose details of incremental borrowing and shortfalls in debt securities issuance. Annexure C provides illustrative examples demonstrating how to calculate mandatory borrowing requirements, carry forward shortfalls, and compute penalties across different financial years.
Text
With a view to operationalising the Union Budget announcement for 2018-19... SEBI came out with a discussion paper on July 20, 2018... detailed guidelines for operationalising the above budget announcement are given below.
For the entities following April-March as their financial year, the framework shall come into effect from April 01, 2019 and for the entities which follow calendar year as their financial year, the framework shall become applicable from January 01, 2020.
The framework shall be applicable for all listed entities (except for Scheduled Commercial Banks)... i. have their specified securities or debt securities or non-convertible redeemable preference share, listed on a recognised stock exchange(s)... ii. have an outstanding long term borrowing of Rs 100 crores or above... iii. have a credit rating of "AA and above"...
A listed entity, fulfilling the criteria as specified at para 2.2 above, shall be considered as a “Large Corporate” (LC) and such a LC shall raise not less than 25% of its incremental borrowings, during the financial year subsequent to the financial year in which it is identified as a LC, by way of issuance of debt securities...
For FY 2020 and 2021, the requirement of meeting the incremental borrowing norms shall be applicable on an annual basis... Provided that in case where a LC is unable to comply with the above requirement, it shall provide an explanation for such shortfall to the Stock Exchanges...
From FY 2022, the requirement of mandatory incremental borrowing by a LC in a FY will need to be met over a contiguous block of two years... However, if at the end of two years... there is a shortfall... a monetary penalty/fine of 0.2% of the shortfall in the borrowed amount shall be levied...
Within 30 days from the beginning of the FY, disclose the fact that they are identified as a LC, in the format as provided at Annexure A.
Within 45 days of the end of the FY, the details of the incremental borrowings done during the FY, in the formats as provided at Annexure B1 and B2.
The disclosures made in terms of para 4.1 shall be certified both by the Company Secretary and the Chief Financial Officer, of the LC.
Further, the disclosures made in terms of para 4.1 shall also form part of audited annual financial results of the entity.
The Stock Exchange(s) shall collate the information about the LC, disclosed on their platform, and shall submit the same to the Board within 14 days of the last date of submission of annual financial results.
In the event of a short fall in the requisite borrowing, the Stock Exchanges shall collect the fine as mentioned at para 3.2(ii). The fine so collected shall be remitted by the stock exchanges to SEBI IPEF fund within 10 days from the end of the month in which the fine was collected.
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Fund raising by issuance of Debt Securities by Large Entities. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.