SEBI Circular on Reduction in Timeline for Listing of Debt Securities and Non-Convertible Redeemable Preference Shares (‘NCRPS’) - MMJC

1. Introduction:

On September 26, 2024, the Securities and Exchange Board of India (‘SEBI’) issued a circular aimed at reducing the timeline for listing debt securities and non-convertible redeemable preference shares (‘NCRPS’). The  present circular vide SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/129, outlines the introduction of a shortened listing timeline of T+3 working days, replacing the existing T+6 working days for public issues of these securities. This change is part of SEBI’s efforts to facilitate faster access to capital for issuers and ensure quicker liquidity for investors.

2. Background and Existing Framework

Prior to this circular, the listing of debt securities and NCRPS issued through public offerings had to be completed within T+6 working days, as per Para 12 of Chapter I of SEBI’s Master Circular (SEBI/HO/DDHS/PoD1/P/CIR/2024/54) dated May 22, 2024. Under this system, issuers were required to refund application monies if the securities were not listed within this period, as mandated by Regulation 37(2) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (‘NCS Regulations’).

In cases of failure to meet the listing timeline, SEBI regulations required issuers to refund or unblock application monies within two working days from the scheduled listing date. Any delay beyond this would result in the issuer being liable to pay 15% annual interest to investors.

3. Introduction of T+3 Timeline

In an effort to streamline the listing process and align it with the timeline for privately placed debt securities and other specified securities, SEBI has decided to reduce the timeline for listing public issues of debt securities and NCRPS to T+3 working days. This shortened timeline ensures that issuers can access funds more quickly, while investors benefit from faster credit and liquidity of their investments.

The circular specifies that the T+3 timeline will be implemented on an optional basis for one year starting November 1, 2024, after which it will become mandatory for all public issues opening on or after November 1, 2025. During the voluntary period, Regulation 37(2) will still apply after T+6 working days, even if the issuer opts for the T+3 timeline but fails to meet it.

The circular includes an annexure detailing the new indicative timeline for listing debt securities and NCRPS under the T+3 system.

The provisions of this circular are applicable in two phases:

1. Voluntary Basis: The option to adopt the T+3 timeline will be available to issuers for public issues of debt securities and NCRPS opening on or after November 1, 2024.
2. Mandatory Basis: From November 1, 2025, all public issues of debt securities and NCRPS will be required to comply with the T+3 listing timeline.

Stock exchanges will be responsible for monitoring compliance with the new timeline. SEBI will use its powers under Section 11(1) of the SEBI Act, 1992, and Regulation 55(1) of the NCS Regulations to enforce these provisions, aimed at protecting investor interests and ensuring the smooth development of the securities market.

Conclusion

SEBI’s reduction in the timeline for listing debt securities and NCRPS is a significant step towards enhancing market efficiency and improving the investment experience. By shortening the period between issue closure and the commencement of trading, issuers can access capital more rapidly, while investors gain quicker liquidity. This regulatory change aligns with SEBI’s broader objectives of fostering a more dynamic and responsive capital market, ensuring that both issuers and investors benefit from a streamlined and faster listing process.

Link to the circular : https://www.sebi.gov.in/legal/circulars/sep-2024/reduction-in-the-timeline-for-listing-of-debt-securities-and-non-convertible-redeemable-preference-shares-to-t-3-working-days-from-existing-t-6-working-days-as-an-option-to-issuers-for-a-period-of-_87014.html