Sebi raises threshold for High Value Debt Listed Entities to ₹5,000 crore; aims to ease fundraise efforts

The Securities and Exchange Board of India (Sebi), on Wednesday, 17 December, eased the threshold for High Value Debt Listed Entities (HVDLEs) in an effort to ease compliance and make it easier for companies to raise funds through corporate bond issues.

Sebi increased the HVDLE threshold to ₹5,000 crore through its latest amendment as the market regulator aims to facilitate the ease of doing business, compared to its earlier threshold of ₹1,000 crore, according to an official release.

As per the current norms, HVDLEs are identified as having outstanding non-convertible debt of ₹1,000 crore or more. The approved proposal to relax the outstanding non-convertible debt to ₹5,000 crore will benefit regulated entities such as NBFCs, HFCs, ARCs, insurance companies and REITS.

“The Board approved a proposal to relax the threshold for identification of HVDLEs to companies having outstanding non-convertible debt of ₹5,000 crore. This will make it easier for regulated entities like NBCs, HFCs, ARCs, insurance companies and REITS to raise funds through corporate bond issuance,” said Sebi in its release.

A High Value Debt Listed Entity is a publicly listed company which is traded based on a non-convertible debt instrument, like a bond or debenture, with an outstanding value. This outstanding value has now been increased to ₹5,000 crore.

Was the limit too low to begin with?

According to Sebi Chairman Tuhin Kanta Pandey, the High Value Debt Listed Entities limit was ‘very low’ in relation to the debt which many regulated entities raise.

“They are the ones who have been classified today within outstanding, you know, non-convertible debt of ₹1,000 crore or more. Now, this limit is actually very low in relation to the debts that many of the entities raise. For example, NBFCs, etc. So there is a constraint on that,” the Sebi chief said on Wednesday.

Pandey also highlighted that the move aims to alleviate the constraint on companies looking to raise funds via a corporate bond issue.

“So that's been raised to ₹5,000 crore. And so this is an ease of doing business. What happens with the HVDLE is the additional corporate governance requirements. And those corporate governance requirements would be an extra cost also to them,” the Sebi chairman said.

Corporate governance norms tweaked

Sebi also approved proposals related to the corporate governance norms for HVDLEs in its recent amendments. The changes under the updated norms are as follows:

1. If a non-executive director seeks to work beyond the age of 75 years, the continuation will be only approved through a special resolution with the prior approval of the company shareholders.

The Sebi release also specified that the time taken for regulatory, statutory or government approvals will be excluded from the timeline specified to get the shareholder nod for the appointment or re-appointment of directors.

2. There will be an exemption from obtaining shareholder approval for nominee directors of financial sector regulators, Debenture Trustee, or those appointed by the Court or Tribunal.

3. A three-month time period will be provided to fill the vacancies on the board of the HVDLE.

4. The recommendations of the shareholders to the board should specifically include the rationale of the board of directors.