CHAPTER 10 - ISSUE AND LISTING OF NON-

CONVERTIBLE SECURITIES
1. SEBI (Securities and Exchange Board of India) merged two regulations: ILDS (Issue and Listing
of Debt Securities) Regulations, 2008 and NCRPS (Issue and Listing of Non-Convertible
Redeemable Preference Shares) Regulations, 2013.
2. after merger New regulation: SEBI (Issue and Listing of Non-Convertible Securities)
Regulations, 2021.
IMPORTANT DEFINITIONS UNDER THE SEBI Non-Convertible Securities REGULATIONS
Debt Securities
Debt securities are defined as non-convertible debt securities with a fixed maturity period that
creates or acknowledges indebtedness. Examples include debentures, bonds, or other
securities, but exclude security receipts, securitized debt instruments, money market
instruments, and government bonds.
Non-Convertible Securities
Non-convertible securities are defined as securities that include:
1. Debt securities

2. Non-convertible redeemable preference shares

3. Perpetual non-cumulative preference shares

4. Perpetual debt instruments

5. Other securities as specified by the Securities and Exchange Board of India (SEBI) Issuer

An issuer is an entity that is authorized to issue non-convertible securities and/or commercial

paper. This can include:
- A company

- A body corporate

- A statutory corporation

- A multilateral institution

- A trust registered as a Real Estate Investment Trust (REIT) or an Infrastructure Investment

Trust (InvIT)
Electronic Book Provider Platform
An electronic platform provided by a recognized stock exchange(s) or a recognized depository,
for the private placement of non-convertible securities, after obtaining approval from the
Securities and Exchange Board of India (SEBI).

Non-Convertible Redeemable Preference Share

A preference share that:
- Can be redeemed according to the Companies Act, 2013

- Cannot be converted into or exchanged for equity shares of the issuer

Perpetual Debt Instrument

A debt instrument that:
- Has no maturity date

- Is issued according to Reserve Bank of India guidelines

Perpetual Non-Cumulative Preference Share

A preference share that:
- Has no maturity date

- Does not accumulate dividends

- Is issued according to Reserve Bank of India guidelines # Applicability NCS Regulations, 2021

[Regulation 3]
The SEBI NCS Regulations, 2021 apply to:
1. Public issuance and listing of:

- Debt securities

- Non-convertible redeemable preference shares

2. Issuance and listing of non-convertible securities on a private placement basis, which are
proposed to be listed
3. Listing of commercial paper issued by an issuer in compliance with the guidelines framed by
the Reserve Bank of India
# GENERAL CONDITIONS AND ELIGIBILITY CRITERIA [Chapter II]
Eligible Issuers (Regulation 5)

{1} An issuer is not eligible to issue non-convertible securities if:

a. Debarment [Prohibition or ban from participating in the securities market]: The issuer, any
of its promoters, promoter group, or directors are debarred from accessing the securities
market or dealing in securities by SEBI.
b. Association with Debarred Entities: Any of the promoters or directors of the issuer is a
promoter or director of another company which is debarred from accessing the securities
market or dealing in securities by SEBI.
c. Wilful Defaulter: The issuer or any of its promoters or directors is a wilful defaulter.

d. Association with Wilful Defaulters: Any of the promoters or whole-time directors of the
issuer is a promoter or whole-time director of another company which is a wilful defaulter.
e. Fugitive Economic Offender: Any of its promoters or directors is a fugitive economic
offender.
f. Unpaid Fines/Penalties: Any fine or penalties levied by the SEBI/Stock Exchanges is pending
to be paid by the issuer at the time of filing the offer document.
Exceptions
1. Nominee Director: Restrictions mentioned at (b) and (d) above shall not be applicable in
case of a person who was appointed as a director only by virtue of nomination by a debenture
trustee in other company.
2. Expired Debarment: Restrictions mentioned in (a) and (b) above shall not be applicable
if the period of debarment is over as on date of filing of the draft offer document with the SEBI.
3. Private Placement: Restrictions mentioned at (c) and (d) shall not be applicable in case
of private placement of non-convertible securities.
{2}. Default in Payment
The issuer cannot make a public issue of non-convertible securities if it has defaulted on
payment of interest or principal amount on existing non-convertible securities for over 6
months.
In-Principle Approval {Reg. 6}
The issuer must obtain in-principle approval from the stock exchange(s) where the non-
convertible securities will be listed.
However, where the application is made to more than one stock exchange, the issuer shall
choose one among them as the designated stock exchange.
Depositories {Reg.7}
The issuer must:
1. Enter into an arrangement with a depository for dematerialization of the non-convertible
securities in accordance with the Depositories Act, 1996 and regulations made thereunder
and,
2. Ensure the securities are admitted to all depositories.

Debenture Trustee {Reg.8}

The issuer must appoint a debenture trustee for debt security issues.

Registrar to the Issue {Reg.9}

The issuer must appoint a separate entity, registered with SESB, to act as the Registrar to the
Issue. This entity must have connectivity with all depositories.
Restrictions:
- The issuer itself cannot act as the Registrar to the Issue.

- The lead manager (the entity handling the issue process) cannot act as the Registrar to the
Issue if they are also handling post-issue responsibilities.
Credit Rating (Regulation 10):
Issuer must obtain credit rating from at least one agency and disclose it in the offer document.
If multiple ratings are obtained, all ratings, including unaccepted ratings, must be disclosed.
Recovery Expense Fund (Regulation 11):
Issuer must create a recovery expense fund with the designated stock exchange by depositing a
specified amount in a specified form and manner.
Electronic Issuances (Regulation 12):
Issuers proposing to issue non-convertible securities through online systems of stock exchanges
and depositories must comply with relevant regulations.
Regulatory Fees (Regulation 13):
 Issuers must pay regulatory fees to SEBI or the designated stock exchange, depending on the
type of issue (public or private).
Regulation 15: Right to Recall or Redeem Prior to Maturity
An issuer making issuance of non-convertible securities shall:
a) have the right to recall such securities prior to the maturity date (call option); or,

b) shall have a right to provide such right of redemption of debt securities prior to the maturity
date (put option) to all the investors or only to retail investors.
Exercise of Right
1. Terms of Issue: Right to recall or redeem must be exercised according to the terms of issue.

2. Disclosure: Detailed disclosure must be made in the offer document, including:

1. Date from which the right is exercisable

2. Period of exercise (minimum 3 working days)

3. Redemption amount (including premium or discount)

3. Partial Exercise: Issuer may exercise the right partially, but only on a proportionate basis.

4. Notice Period: Issuer must send notice to eligible holders and debenture trustee at least 21
days before the exercise date.
5. Advertisement and Disclosure: Issuer must provide a copy of the notice to the stock
exchange(s) for wider dissemination and make an advertisement in an English national daily
and regional daily.
After the completion of the exercise of such right, the issuer shall:
a) submit a report to the stock exchange(s) where the non-convertible securities are listed for
public dissemination regarding the details of non-convertible securities redeemed during the
exercise period and details of redemption thereof;
b) inform the debenture trustee regarding the debt securities redeemed during the exercise
period and details of redemption thereof; and
c) inform the depositories for extinguishing the non-convertible securities that have been
redeemed.
Debenture Redemption Reserve/Capital Redemption Reserve (Regulation 16)
Issuer must create a debenture redemption reserve or capital redemption reserve as per
Companies Act, 2013.
International Securities Identification Number (Regulation 17)
Issuer must comply with SEBI-specified conditions relating to the issue of International
Securities Identification Number (ISIN).
Default by issuer will be recorded at ISIN level, regardless of multiple offer documents.
Regulation 18: Trust Deed
Key Provisions
1. Execution Timeline: Issuer and debenture trustee must execute the trust deed within
the timeline specified by SEBI.
2. Default Penalty: If the issuer fails to execute the trust deed on time, they must pay
interest at least 2% per annum (or as specified by SEBI) above the agreed coupon rate until the
trust deed is executed.
3. Trust Deed Content: Trust deeds containing matters as per Section 71 of the Companies
Act, 2013, and Form SH.12 of the Companies (Share Capital and Debentures) Rules, 2014.
Trust Deed Structure: Consists of two parts:
1. Part A containing Statutory/standard information pertaining to the debt

issue. 2. Part B containing Details specific to the particular debt issue

4. Prohibited Clauses: The trust deed cannot contain clauses that:

1. Limit or extinguish obligations/liabilities of debenture trustees or issuers

2. Limit/restrict/waive provisions of the Act, regulations, or SEBI guidelines

3. Indemnify debenture trustees or issuers for losses caused by negligence or

commission/omission
5. Issuer's Bank Details: The trust deed must contain the issuer's bank details for interest and
redemption payments, and the issuer must pre-authorize the debenture trustee to seek
information from the bank.
6. Additional Particulars: The trust deed must contain any other particulars specified by SEBI.

Distribution of Dividend in case of default in payment of interest or redemption of debt

securities (Regulation 22) if an issuer defaults on:

1. Paying interest

2. Redeeming debt securities

3. Creating security (as promised in the offer document)

Then, the issuer cannot distribute dividends without getting approval from the debenture
trustee.
Regulation 23: Obligations of the Issuer
1. Fair Treatment: Issuer shall Treat all applicants fairly and equitably, following SEBI-
specified procedures.
2. No Fraudulent Activities: The issuer must not engage in any fraudulent or deceptive
practices related to the issue, subscription, or distribution of non-convertible securities.
3. SCORES Authentication: Apply for SCORES authentication in the specified format and
use it for all non-convertible securities issuances.
4. Due Diligence Information: Issuer shall Provide required information/documents to lead
managers for conducting due diligence in public issues, as specified by SEBI
5. Security Cover: The issuer must ensure that the secured debt securities are backed by
sufficient assets or security to cover at least 100% of the principal amount and interest
payments, as specified in the offer document or Debenture Trust Deed.

Regulation 24: Obligations of Debenture Trustee

1. Protecting Holder's Interest: Debenture trustee has powers to protect debt security holders'
interests, including appointing a nominee director on the issuer's Board.

2. Supervising Conditions: Debenture trustee supervises implementation of conditions

regarding:
1. Security creation for debt securities

2. Recovery expense fund creation

3. Debenture redemption reserve creation (as applicable)

3. Monitoring Security Cover: Debenture trustee monitors security cover for secured debt
securities as specified by the Board.

# PUBLIC ISSUE AND LISTING OF DEBT SECURITIES AND NON CONVERTIBLE REDEEMABLE
PREFERENCE SHARES [chapter III]
Conditions for Public Issue:
1. Lead Manager Appointment
- The issuer must appoint one or more SEBI-registered merchant bankers as lead managers.

- Rights, obligations, and responsibilities of each lead manager must be predetermined and
disclosed in the draft offer document and offer document.
2. Lead Manager Independence
If there's only one lead manager, it cannot be an associate of the issuer (as per SEBI's Merchant
Bankers Regulations, 1992).
Exceptions:
- If the lead manager is an associate, it must:

- Disclose itself as an associate of the issuer and

- its role shall be limited to the marketing of the issue

- Such lead manager shall not issue any due diligence certificate, in relation to the issue of such
debt securities and/or non-convertible redeemable preference shares:
- If there are multiple lead managers, at least one must not be an associate.

3. General Rule: Issuers cannot make a public issue of debt securities and non-convertible
redeemable preference shares to:
1. Give loans to or

2. Buy shares of ,companies owned by their promoters or group companies.

Exception: Non-Banking Finance Companies, Housing Finance Companies, and Public Financial
Institutions are exempt from this rule, but must make appropriate disclosures as specified in
Schedule I.

Issuance of Green Debt Securities

1. Definition: Green Debt Security refers to a debt security issued to raise funds for
projects/assets in specific categories.
2. Eligible Categories: Funds raised through Green Debt Securities must be used for
projects/assets in categories as may be specified by SEBI from time to time:
i. Renewable and sustainable energy including wind, solar, bioenergy, other sources of energy
which use clean technology, ii. Clean transportation including mass/public transportation, iii.
Sustainable water management including clean and/or drinking water, water recycling, iv.
Climate change adaptation,

v. Energy efficiency including efficient and green buildings, vi. Sustainable waste

management including recycling, waste to energy, efficient disposal of wastage, vii.

Sustainable land use including sustainable forestry and agriculture, afforestation, viii.

Biodiversity conservation, or ix. a category as may be specified by the SEBI, from time to

time.

Filing of Draft Offer Document

1. Pre-requisite: Before making a public issue of debt securities and/or non-convertible
redeemable preference shares, the issuer must file a draft offer document with all relevant
stock exchanges through the lead manager.
2. Public Comments: The draft offer document must be made public on the stock
exchange's website for 7 working days to seek public comments.
3. Display Requirements: The draft offer document must also be displayed on the issuer's
and lead manager's websites.
4. Compliance Officer Details: The draft offer document must clearly specify the
compliance officer's (Company Secretary) name, contact details, postal address, email, and
phone number.
5. Addressing Comments: The lead manager must ensure that all comments received on
the draft offer document are addressed before filing the offer document with the Registrar of
Companies.
6. Due Diligence Certificate: Before filing the offer document with the Registrar of
Companies, the lead manager must furnish a due diligence certificate to SEBI in the prescribed
format.
Disclosures and Requirements for Public Issues
1. Offer Document Disclosures: The offer document must contain true, fair, and adequate
disclosures necessary for subscribers to make informed decisions.

2. Mode of Disclosure: The offer document must be displayed on the websites of the stock
exchange, issuer, and lead manager for download.
3. Filing Requirements: The issuer must file the offer document with the stock exchange
and Registrar of Companies simultaneously.
4. Advertisements: The issuer must publish an advertisement in English and regional
newspapers with wide circulation at the place of the issuer's registered office before the issue
opening date.
5. Prohibition on Incentives: No person connected with the issue can offer incentives,
direct or indirect, in cash, kind, services, or otherwise, for making an application in the issue,
except for fees or commission for services rendered.
6. Abridged Prospectus and Application Forms: The issuer and lead manager must ensure
that every application form and abridged prospectus is in the format specified by SEBI and does
not contain extraneous matters.
7. Price Discovery and Book Building
1. Price Determination: The issuer, in consultation with the lead manager, may determine
the price and/or coupon of debt securities and non-convertible redeemable preference shares.
2. Fixed Price or Book Building: The issue can be at a fixed price and fixed coupon or
through the book building process, as specified by SEBI.
8. Minimum Subscription
1. Minimum Subscription Requirement: The minimum subscription for a public issue must
be at least 75% of the base issue size, as specified by SEBI.
2. Refund of Application Money: If the minimum subscription is not received, all blocked
application money must be unblocked within 8 working days from the date of issue closure.
9. Allotment and Payment of Interest
1. Allotment Timeline: The issuer must ensure allotment of securities within the timeline
specified by SEBI.
2. Interest Payment: If securities are not allotted or application money is not unblocked
within the stipulated period, the issuer must pay interest at 15% per annum to investors.
10. Underwriting
1. Underwriting Option: A public issue of debt securities and non-convertible redeemable
preference shares can be underwritten by eligible intermediaries, fully or partially.
2. Disclosure Requirement: Underwriting arrangements must be disclosed in the offer
document.
11. Mandatory Listing
1. Listing Requirement: An issuer making a public offer of debt securities and non-convertible
redeemable preference shares must apply for listing on a stock exchange, as per Section 40 of
the Companies Act, 2013.
# LISTING OF PRIVATE PLACEMENT OF DEBT SECURITIES AND NON-CONVERTIBLE
REDEEMABLE PREFERENCE SHARES [CHAPTER IV]
1. Listing Application: If the issuer intends to list debt securities and non-convertible
redeemable preference shares issued through private placement, they must submit a listing
application to the stock exchange within the timeframe specified by SEBI.
2. Disclosures: The listing application must include disclosures as per the regulations.

3. Allotment of Securities: The issuer must ensure that allotment of debt securities and non-
convertible redeemable preference shares is made within the timeframe specified by SEBI
and credited to the dematerialized accounts of investors.
# ISSUANCE AND LISTING OF PERPETUAL DEBT INSTRUMENTS, PERPETUAL NON-CUMULATIVE
PREFERENCE SHARES AND SIMILAR INSTRUMENTS [CHAPTER V]
1. General Conditions: Issuers can issue perpetual debt instruments, perpetual non-
cumulative preference shares, and similar instruments, complying with RBI guidelines and
relevant laws.
2. Listing Conditions: Issuers permitted by RBI to issue these instruments as part of non-
equity regulatory capital can list them after complying with Chapter V conditions.
# Listing of Commercial Paper [Chapter VI]
1. Compliance with SEBI Conditions: Issuers seeking to list commercial paper must comply
with SEBIspecified conditions.
2. Regulatory Fee: The designated stock exchange will collect a regulatory fee from the
issuer at the time of listing.
3. SCORES Authentication: The issuer must apply for SCORES authentication in the
specified format and use it for issuance and listing of commercial paper.