Sebi's recent decision to reduce the face value of corporate bonds from Rs 1 lakh to Rs 10,000 is aimed at encouraging greater participation from retail investors in the corporate bond market. Nithin Kamath, the co-founder of Zerodha, has praised this move, emphasizing its potential to make bonds more accessible to small investors.
Kamath has previously highlighted the challenge faced by retail investors due to the unavailability of bonds with smaller face values, which typically had face values of Rs 10 lakh or more. With the reduction in face value, retail investors now have a more viable entry point into the bond market.
Sebi's move also includes standardizing record dates, harmonizing due diligence certificate formats, and introducing flexibility in financial results publication for entities dealing with non-convertible securities.
Furthermore, Sebi has approved a proposal allowing issuers to issue Non-Convertible Debentures (NCDs) or Non-Convertible Redeemable Preference Shares (NCRPS) through private placement mode at the reduced face value of Rs 10,000. These instruments must be plain vanilla, interest, or dividend-bearing, with credit enhancements permitted.
Additionally, to address inconsistencies related to record date fixation, Sebi has mandated that record dates for payment obligations be set 15 days before the due dates, aiming to bring uniformity to market practices.
Overall, these regulatory changes are expected to democratize access to the corporate bond market, empowering retail investors and diversifying investment opportunities.
