Corporate bonds: New Buy-Back Window

Corporate bonds: New Buy-Back Window

Brief Overview:

A mechanism for periodic buybacks called the liquidity window facility (“LWF”) for investors to boost liquidity and retail participation in the secondary market for corporate bonds has been announced.

Technical Details:

1) Discretion of Issuer: LWF to be provided at the discretion of issuer on a specific international securities identification number to eligible investors at the time of issuance.

2) Approvals for LWF: Issuer to take prior approval from its board of directors to provide LWF.

3) Minimum Holding Period: LWF not to be provided within a year from the date of issuance.

4) Eligible Investor: Issuer offering LWF shall specify whether such facility is to be provided to all investors or retail investors. Investor availing LWF shall hold such debt securities in demat form.

5) Aggregate Limit of LWF: Issuer to specify in the offer document, a minimum of 10% of the total issue size must be allotted to the liquidity window.

6) Time Period of liquidity window: The liquidity window will be open for 3 working days and can be scheduled monthly and / or quarterly on a stock exchange as designated by the Issuer.

7) Compliance with NCS Regulations: Issuer shall within 5 working days from start of Financial Year shall intimate investors of the schedule by SMS / WhatsApp message.

8) Bar on Retrospective Application: LWF to be provided only for prospective issuance of debt securities from November 01, 2024, onwards.

JC takeaway:

This move by SEBI is aimed at increasing the liquidity in the market which is expected to boost the corporate bond market.

For further details, please see:

SEBI | Liquidity Window Facility

For any queries / clarifications, please feel free to ping us and we will be happy to chat:

Smit Parekh & Apurva Kanvinde

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