QIP mechanism: Sebi makes the e-book platform mandatory for the MNT part
Market regulator Sebi on Friday issued guidelines for non-convertible debentures with warrant products, whereby it made the e-book platform (EBP) mandatory for the NCD portion of the issue.
This decision aims to streamline the issuance procedure and the applicability of the EBP mechanism on the MNT part.
In cases where the size of the NCD part is greater than the threshold prescribed by the rules, Sebi has stated that “the EBP platform mechanism will be mandatory for the NCD part of the show (for stapled and split offers) “, according to the circular.
Currently, the list of MNTs of Rs 200 crore or more in a year is only possible if this issue is done through the electronic book mechanism.
In a Qualified Institution (QIP) placement of NCD instruments with warrants, an investor can either subscribe to the combined offering of NCD instruments with warrants or to individual securities (i.e. – say NCD or warrants).
It depends on the type of offer made by the issuer – whether the issuer offered a basic or separate product.
In the basic product, the warrants are attached to the NCDs, while in the separate product, the NCDs and the warrants can be subscribed separately.
Of the “total issue size” of the issue, at least 40% of the size will consist of a “portion of the warrants,” the Securities and Exchange Board of India (Sebi) said.
It should be noted that “total issue size” will mean the combined size of the NCD issue and the overall size of the warrant portion, including the conversion price of the warrants.
In December, the regulator published a consultation paper regarding the issuance of NCDs as well as warrants as a commodity and a separate product offered through a qualified institutional placement.
In the consultation document, Sebi had proposed to stop the separate offers of MNT as well as the warrants to institutional investors under the QIP mechanism.
In addition, the regulator suggested that NCD’s core offerings as well as warrants to institutional investors could be kept with the option of separating instruments after issuance or allocation.
The regulator had also proposed to authorize the issuance of bare warrants to institutional investors via the QIP channel.
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