The high level expert committee, headed by Dr. R. H. Patil, on Corporate Bonds and Securitization (CoBoSAC) was set up in 2008 and is tasked with recommending measures for the development of the market for corporate bonds and securitized debt instruments. While observing that the corporate bond market is highly fragmented due to multiple issuances of privately placed bonds, one of the committee’s latest recommendations was to permit consolidation and re-issuance of these fragmented units. A similar experiment was attempted in 1999 wherein consolidation was permitted in the G-sec market and it has resulted in both larger stock size and improved market liquidity. The objective behind the current proposal is to have a similar outcome in the corporate bond market.
Based on the above recommendation, SEBI proposes to amend the SEBI (Issue and Listing of Debt Securities) Regulations, 2008, by adding a new sub-regulation to regulation 18. This sub-regulation will enable an issuer to carry out consolidation and re-issuance of its debt securities through private placement as long as its articles of association contain a provision permitting the same. The issuer will also be required to obtain and disclose a credit rating from a registered credit rating agency and should ensure that it is periodically revalidated. If the G-sec market is anything to go by, the proposed change is sure to have a positive outcome on the corporate bond market.