Page 1 of 14 CONSULTATION PAPER Consolidation and re-issuance of debt securities issued under the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 A. Market Structure of corporate bonds: The development of the primary market in corporate bond has been important part of the reform process as it was essential for discovery of price through an efficient market mechanism and providing for both listing and issuance of debt securities on private placement and public issuance basis. Table 1:Primary market data for private placement of corporate bonds: Financial Year No. of Publi c Issue s Amount Raised through Public Issue (Rs. Crore) No. of Pvt. Placemen t Amount Raised through Private Placement (Rs. Crore) Total Amount Raised through Public Issue and Pvt. Placement (Rs. Crore) 2007-08 0 0 744 118,485 118,485 2008-09 1 1,500 1041 173,281 174,781 2009-10 3 2,500 1278 212,635 215,135 2010-11 10 9,451 1404 218,785 228,236 2011-12 20 35,611 1953 261,283 296,894 2012-13 20 16,982 2489 361,462 378,444 2013-14 35 42,383 1924 276,054 318,437 2014-15 25 9,713 2611 4,04,136 4,13,849 2015-16 20 33,811 2975 4,58,073 4,91,884 2016-17# 14 29213 2662 478,974 5,08,187 # As on January 2017; private placement data is up to December 2016 Table1 shows that the amount of private placement of corporate bonds has increased from Rs 1.18 trillion in the FY 2007-08 to Rs 4.78 trillion in the FY 2016-17. Thus, it can be seen that the private placement issues have increased by 176.41 % since FY 2007-08 till date. Further, the public issues in the primary market have increased from nil figures in the FY 2007-08 to Rs 29,213 crores. The total primary issuance in the corporate bond market has increased by 328.9% since FY 2007-08.
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Consolidation and re-issuance of debt securities issued under the SEBI (Issue and Listing of Debt Securities) Regulations, 2008
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Page 1 of 14
CONSULTATION PAPER
Consolidation and re-issuance of debt securities issued under the SEBI
(Issue and Listing of Debt Securities) Regulations, 2008
A. Market Structure of corporate bonds:
The development of the primary market in corporate bond has been important part of the
reform process as it was essential for discovery of price through an efficient market
mechanism and providing for both listing and issuance of debt securities on private
placement and public issuance basis.
Table 1:Primary market data for private placement of corporate bonds:
Financial Year
No. of Public Issues
Amount Raised through Public Issue (Rs. Crore)
No. of Pvt. Placement
Amount Raised through Private Placement (Rs. Crore)
Total Amount Raised through Public Issue and Pvt. Placement (Rs. Crore)
2007-08 0 0 744 118,485 118,485
2008-09 1 1,500 1041 173,281 174,781
2009-10 3 2,500 1278 212,635 215,135
2010-11 10 9,451 1404 218,785 228,236
2011-12 20 35,611 1953 261,283 296,894
2012-13 20 16,982 2489 361,462 378,444
2013-14 35 42,383 1924 276,054 318,437
2014-15 25 9,713 2611 4,04,136 4,13,849
2015-16 20 33,811 2975 4,58,073 4,91,884
2016-17# 14 29213 2662 478,974 5,08,187
# As on January 2017; private placement data is up to December 2016
Table1 shows that the amount of private placement of corporate bonds has increased from
Rs 1.18 trillion in the FY 2007-08 to Rs 4.78 trillion in the FY 2016-17. Thus, it can be seen
that the private placement issues have increased by 176.41 % since FY 2007-08 till date.
Further, the public issues in the primary market have increased from nil figures in the FY
2007-08 to Rs 29,213 crores. The total primary issuance in the corporate bond market has
increased by 328.9% since FY 2007-08.
Page 2 of 14
As per section 42 of the Companies Act, 2013 read with the Companies (Prospectus and
Allotment of Securities) Rules, 2014, if a bond issue is made to more than 200 investors
(excluding QIBs), the issuer has to follow the public issue route. To meet their funding
requirements, some of the issuers take recourse in issuing several issues of bonds in a
single month/quarter/year.This evidences that the private placement mode of issuance of
corporate bond is substantially robust and favored for raising funds.
While the primary market for corporate bonds/debt securities has grown since the year
2007, the liquidity in secondary market has not been high and commensurate with the
growth in the primary market.
Table 2: Details of Trades in Secondary Market in Listed Corporate Bonds:
Secondary Market Trades in Corporate Bonds
Month/Year Total no. of trades Total Amount (Rs Crores)
2008-09 22730 1,48,166
2009-10 38230 4,01,198
2010-11 44060 6,05,274
2011-12 51533 5,93,783
2012-13 66383 7,38,631
2013-14 70887 9,70,799
2014 -15 75791 10,91,293
2015-16 70123 10,22,407 2016-17# 71430 11,70,633
# January 2017
The above table shows that the trading of corporate bonds in the secondary marketing has
increased from Rs 1.48 trillion in the FY 2008-09 to Rs 11.70 trillion in the FY 2016-17.
However, the average number of trades per day continues to be very limited at around Rs
2000 crores. Generally, the investors prefer to buy and hold the security, instead of trading
it in the secondary market. Moreover, some of the investors, are prohibited from trading
the debt securities in the secondary market unless the rating of such debt securities falls
two notches below their initial credit rating. The absence of a well-developed corporate
bond repo market and secondary market infrastructure such as credit default swaps,
interest rate futures, lack of participation on the dedicated debt segment of the exchanges
etc. can be touted as some of the reasons due to the absence of liquidity in the secondary
market.
Page 3 of 14
Table 3 shows that the issuer 1 had over the period of four months, frequently used the
private placement mode for raising different amounts of capital, thus creating multiple
ISINs.
Table 3: Examples of private placement issuance made by an issuer
Date of the Issue Name of the issuer
Amount raised Tenure Yield/Coupon
Aug 23, 2016 Issuer 1 25 36 8.26 September 08, 2016
Issuer 1 125 36 8.20
September 08, 2016
Issuer 1 25 39 8.20
September 08, 2016
Issuer 1 25 18 8.00
September 08, 2016
Issuer 1 25 39 8.18
November 22, 2016
Issuer 1 100 36 7.77
November 22, 2016
Issuer 1 200 24 7.76
November 22, 2016
Issuer 1 150 18 7.66
Total 675
Table 4 below shows that each of the top issuers of corporate bonds have more than 200
ISINs, which has resulted in large number of outstanding issuances at any point of time.
Table 4: Top Issuers of corporate bonds with their total ISINs:
Serial No. Issuer Name No of ISINs issued Custody Value (Rs Crores)