Sebi for listing of private debt

Proposal aimed at bringing in transparency, facilitating trading in such instruments.

The Securities & Exchange Board of India (Sebi) today said it was in favour of compulsory listing of privately-placed debt issues, which are corporate bonds issued to no more than 50 investors, as a means to bring in more transparency and facilitate trading in such instruments.

Privately-placed debt issues "" most companies prefer to raise debt through this route these days "" are at present not subject to any disclosure norms, which become binding under the listing agreements of stock exchanges.

A debt issue becomes public once the number of investors crosses 50 and the investors can, in turn, sell to others.

Of late, Sebi has put such privately-placed debt under the microscope. Starting January 1 this year, it made it mandatory that these deals get reported to stock exchanges.

Following the directive, the National Stock Exchange and Bombay Stock Exchange have recently set up reporting platforms. There is a plan to kick off trading in publicly-issued debt from July 1 this year.

"A huge amount of money is raised through private placement (of debt). This is not traded... Our focus is to get these bonds listed on the exchanges and traded," T C Nair, a whole-time member of Sebi, said at a conference organised by International Financial Review in Mumbai.

However, market observers see obstacles in Sebi's path in case of unlisted public sector companies.

"It will not be possible for Sebi to insist on compulsory listing of debt issues by the Union and state governments, and unlisted public sector undertakings as they do not come under the market regulator's purview," said an official with a law firm.

Other sources, however, say even companies that have no public holding may be made to list their privately-issued debt.

"Once debt securities get listed and traded, we expect the bond market to be vibrant in the next three years," said Nair.