SEBI Makes E-Book Mechanism Mandatory for Private Placement Debt Issues
The Securities and Exchange Board of India (SEBI) has recently made a significant move by mandating the use of the electronic book mechanism for all private placement debt issues valued at ₹20 crore or above. This decision, based on recommendations from a working group and public feedback, aims to improve the efficiency of the Electronic Book Provider (EBP) platform. Under the new guidelines, the EBP platform is now compulsory for private placements of debt securities, non-convertible redeemable preference shares (NCRPS), and municipal bonds with an issue size of ₹20 crore or more, including single, shelf, and subsequent issues within a financial year.
Expansion of the Platform to Include REITs and InvITs
The scope of the EBP platform has also been expanded to include real estate infrastructure trusts (REITs) and infrastructure investment trusts (InvITs). This development comes after SEBI extended the products available on the platform to cater to the needs of InvITs and REITs, filling a regulatory gap that existed previously. Issuers now have the option to access the EBP platform for private placement of securitized debt instruments, security receipts, commercial papers (CPs), certificates of deposit (CDs), as well as units of REITs, SM REITs, and InvITs.
Streamlining the Process with New Requirements
SEBI has introduced new requirements to streamline the private placement process through the EBP platform. Issuers are now obligated to submit the placement memorandum and term sheet, which contain key terms and conditions, at least two working days before the issue opens. In the case of first-time users of the EBP, the submission period is extended to three working days. These documents must disclose the base issue size and any green shoe option, with a cap set at five times the base size. Additionally, issuers can reserve a portion of the issue for anchor investors based on the credit rating of the instrument.
Enhancing Transparency and Timeliness
To enhance transparency, SEBI has mandated that in the event of multiple bids being received at the same cut-off price, allotments must be made on a proportionate basis. The EBP platform is required to provide detailed bidding and issue-related information on its website by the end of the bidding day or by 1 PM the following day, depending on when the issue closes. Revised timelines have also been introduced to obtain in-principle approval from stock exchanges before T-2 or T-3 for EBP-based issues and before the issue opens for non-EBP issues. These changes are set to take effect immediately, with certain clauses related to anchor investors, disclosures, and reporting to be implemented three to six months from the date of the circular.
In conclusion, SEBI’s decision to make the electronic book mechanism mandatory for private placement debt issues above ₹20 crore, along with the expansion of the platform to include REITs and InvITs, marks a significant step towards enhancing the efficiency and transparency of the private placement process in India’s financial markets. This move is expected to benefit issuers, investors, and other stakeholders by streamlining procedures and ensuring a more organized and regulated market environment for private placements.
