Thursday, July 15, 2010

ISSUANCE OF NON-CONVERTIBLE DEBENTURES (RESERVE BANK) DIRECTIONS, 2010

Eligibility to issue NCDs


  • the corporate has a tangible net worth of not less than Rs.4 crore
  • the corporate has been sanctioned working capital limit or term loan by bank/s or all-India financial institution/s; and
  • the borrowal account of the corporate is classified as a Standard Asset by the financing bank/s or institution/s.
Rating Requirement


  • An eligible corporate intending to issue NCDs shall obtain credit rating for issuance of the NCDs from one of the rating agencies
  • The minimum credit rating shall be P-2 of CRISIL or such equivalent
  • The Corporate shall ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review.
Maturity

  • NCDs shall not be issued for maturities of less than 90 days from the date of issue.
  • The exercise date of option (put/call), if any, attached to the NCDs shall not fall within the period of 90 days from the date of issue.
  • The tenor of the NCDs shall not exceed the validity period of the credit rating of the instrument.
Denomination

  • NCDs may be issued in denominations with a minimum of Rs.5 lakh (face value) and in multiples of Rs.1 lakh. 
Limit and the Amount of issue of NCDs
 
  • The total amount of NCDs proposed to be issued shall be completed within a period of two weeks
  • from the date on which the corporate opens the issue for subscription.
Procedure for Issuance
  • The corporate shall disclose to the prospective investors, its financial position as per the standard market practice.
  • The auditors of the corporate shall certify to the investors that all the eligibility conditions set forth in these directions for the issue of NCDs are met by the corporate.
  • The requirements of all the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, or any other law, that may be applicable, shall be complied with by the corporate.
Investment in NCD
NCDs may be issued to and held by individuals, banks, Primary Dealers (PDs), other corporate
bodies including insurance companies and mutual funds registered or incorporated in India and
unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs).

Preference for Dematerialisation

Banks, FIs and PDs are required to make fresh investments in NCDs only in dematerialised form.

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