Temporarily halt rupee-denominated bond issuance: Sebi

Markets regulator Sebi today directed Indian companies to "temporarily" stop issuing of rupee-denominated bonds till the total utilisation of corporate debt issuance limit by foreign entities falls below a certain threshold.
Putting in certain restrictions on Foreign Portfolio Investments (FPIs) in purchase of corporate debt, Sebi said there would be auction of such instruments once the 95 per cent level of the Combined Corporate Debt Limit (CCDL) is reached.
"The CCDL shall be available on tap for investment by foreign investors till the overall investment reaches 95 per cent, after which, the auction mechanism shall be initiated for allocation of the remaining limits," a circular said.

In August 2016, the CCDL was fixed at Rs 2,44,323 crore for all foreign investments in rupee-denominated bonds issued both onshore and overseas by Indian corporates.
"As rupee-denominated bonds issued by Indian corporates overseas are covered under CCDL, issuance of such bonds overseas shall temporarily cease, until the limit utilisation falls back to below 92 per cent," Sebi said.
The regulator's latest circular also comes at a time when rupee-denominated bonds are gaining traction among corporates as a fund-raising option.

Once the overall FPI investment in CCDL exceeds 95 per cent, then the depositories -- NSDL and CDSL -- would have to ask the custodians to halt all FPI purchases in corporate debt securities.

After communication from the depositories, exchanges concerned would conduct an auction for the allocation of unutilised debt limits.
According to Sebi, the auction mechanism would be discontinued and the limits made available again for investment on tap when the debt limit utilisation falls below 92 per cent.
After reaching the 95 per cent threshold, the auction of bonds would be done only "if the free limit is greater than or equal to Rs 100 crore".
In case the free limit remains less than Rs 100 crore for 15 consecutive trading days, then an auction would be conducted on the sixteenth trading day to allocate the free limits, the circular said.

Besides, the watchdog has said that FPI investments in unlisted corporate debt securities should "compulsorily be in dematerialised form and subject to a minimum residual maturity of three years".