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Sebi proposes framework for corporates borrowings from bond market

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Mumbai :To deepen the corporate bonds market, the Securities and Exchange Board of India on Friday came out with a proposal that will require large corporates to raise 25 per cent borrowings through this route from next financial year.
The framework is proposed to be implemented from April 1 next year and the large corporates identified as on March 31, 2019 will have to garner at least 25 per cent of their borrowings made in 2019-20 through bond market, Sebi said in a consultation paper.
This is part of an effort to reduce reliance on banks for financing corporates and simultaneously developing a liquid and vibrant corporate bond market.
Given the current stage of development of bond market in the country, Sebi said that any mandatory requirement would need to be ‘light-touch’ in nature and would also need to provide enough leeway to the identified corporates to meet the mandatory requirement from the bond market.
The suggestion comes after a proposal was made in Budget for 2018-19 that Sebi will consider mandating, beginning with large corporates, meeting about one-fourth of the companies’ financing needs from the bond market.
Defining large corporates, Sebi said such firms need to have an outstanding long term borrowing of at least Rs 1 billion; a credit rating of “AA and above” and target to finance themselves with long-term borrowings (above 1 year).
Subsequent to implementation of budget announcement and after making an assessment of the capacity of the bond market to absorb even lower rated issues, Sebi may decide on reducing the threshold of rating framework from “AA” to “A”.
Issuing the draft paper, Sebi said that a “comply or explain” approach would be applicable for the initial two years of implementation. It means, in case of non-fulfilment of the requirement of market borrowing, reasons for the same will have to be disclosed as part of the “continuous disclosure requirements”.
“From third year of implementation, 2021-22 the requirement of bond borrowings shall be tested for a contiguous block of two years 2021-22 and 2022-23 will be treated as one block and the requirement of 25 per cent borrowing through bond market shall need to be complied for the sum of incremental borrowings made across the period of the block,” the regulator noted.
Further, at the end of block, if there is any deficiency in the requisite bond borrowing, a monetary penalty in the range of 0.2 per cent to 0.3 per cent of the shortfall will be levied, it added.
The Sebi has sought comments from public till August 13 on the proposal and a final framework would be put in place after taking views of the stakeholders.
According to Sebi, the regulatory intent would be to operationalise the budget announcement in a manner which provides for a ‘light touch’ framework and at the same time provides an appropriate timeframe to the market for smooth transition to the new guidelines.
Sebi noted that a series of steps have been taken, over time, by the government in consultation with regulators, to develop and deepen the bond market.
At the same time, however, concerns have been raised about the ability of banks to finance increasing borrowing needs of the corporates, especially as the investment cycle has shown an upward tick.


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Business

MPC to meet six times during 2019-20: RBI

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Mumbai: The Monetary Policy Committee (MPC), which decides on key interest rates, will meet six times during the next financial year, the Reserve Bank of India (RBI) said.

The first meeting of the six-member MPC to decide on the first bi-monthly monetary policy statement for 2019-20 will be held from April 2 to 4.

The policy will be announced on April 4. Headed by RBI Governor Shaktikanta Das, the committee also includes two representatives from the central bank and three external members.

 

The external members are Indian Statistical Institute professor Chetan Ghate, Delhi School of Economics Director Pami Dua and Indian Institute of Management-Ahmedabad professor Ravindra H Dholakia.

According to the schedule provided by the RBI, the second meeting of the MPC in the next fiscal will be held on June 3, 4 and 6; third meeting (August 5-7); fourth meeting (October 1, 3 and 4); fifth meeting (December 3-5) and sixth meeting (February 4-6, 2020).

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SBI raises Rs 1,251 crore by issuing Basel III-compliant bonds

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New Delhi: The country’s largest lender State Bank of India (SBI) said it has raised Rs 1,251.30 crore by issuing Basel III-compliant bonds.

“The Committee of Directors for Capital Raising at its meeting held today on 22 March 2019 deliberated and accorded approval to allot 12,513 non-convertible, taxable, perpetual, subordinated, unsecured Basel lll-compliant additional tier-I bonds, for inclusion in additional tier-I capital of the bank…aggregating to Rs 1,251.30 crore,” SBI said in a regulatory filing.

The bonds with a face value of Rs 10 lakh each bears a coupon rate of 9.45 per cent per anum payable annually with call option after 5 years or any anniversary date thereafter, it said. The bonds were subscribed on Friday, it added.

 

State Bank of India (SBI) also said the central board of the bank at its meeting held has accorded its approval for extension of validity period for raising equity capital of up to Rs 20,000 crore from market by way of follow-on public offer, qualified institutional placement, preferential allotment, rights issue or any other mode or a combination of these till March 31, 2020.

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Sebi fines 4 entities Rs 27 lakh for fraudulent trading in BSE stock options

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New Delhi: Markets regulator Sebi imposed a total penalty of Rs 27 lakh on four entities for indulging in fraudulent trade in illiquid stock options segment of BSE.

Umapati Oil Mill and Ginning Factory, Yudhbir Chhibbar, Kasturbhai Mayabhai Pvt Ltd and Vimladevi Shyamsunder Khetan are the four entities, according to Sebi’s separate orders.

fter observing a large-scale reversal of trades in the BSE’s illiquid stock options segment, Sebi conducted a probe from April 2014 to September 2015.

 

Following the probe, the regulator found that the trades executed by the entities were not genuine as they were reversed within few seconds with same counter parties with significant difference in price, resulting in profit to the entities.

Securities and Exchange Board of India (Sebi) said it was a deliberate attempt to deal in such a fashion and not a mere coincidence.

The trades executed by the entities were not genuine and created an appearance of artificial trading volumes, thereby violating PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations, Sebi noted.

Accordingly, a fine of Rs 8.7 lakh and Rs 8.4 lakh were imposed on Yudhbir Chhibbar and Vimladevi, respectively while a penalty of Rs 5 lakh each was levied on Umapati Oil Mill and Kasturbhai Mayabhai Pvt Ltd, totalling Rs 27.1 lakh.

In a separate order, Sebi imposed a total fine of Rs 6 lakh on four promoters of Artech Power Products for delayed disclosures to exchanges regarding their change in the shareholding in the company.

Ranjith Vijayan, I V Vijayan, Repsy Vijayan and Resmi Vijayan are the four promoters, according to Sebi’s order.

The promoters have deprived the vital information to the public by non-disclosure /delayed disclosure as mandated by the Takeover Regulations, Sebi noted.

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