Brief Overview:
Private placements of debt securities or non-convertible redeemable preference shares with a face value of INR 10,000 (“Small-value debt”) may soon benefit from a targeted exemption from the mandatory appointment of a merchant banker, as proposed under SEBI’s consultation paper.
Technical Details:
The proposed exemption is not a free pass. It would be available only if all of the following guardrails are satisfied:
1) the issuer is registered with, or regulated by, a financial sector regulator in India.
2) the issuer has been listed on any recognised stock exchange for at least one year, and the stock exchange confirms that there are no pending SEBI/stock exchange fines or penalties for non-compliance with any applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
3) the issuer has not defaulted during the preceding three financial years and the current financial year in relation to deposits, debt securities/non-convertible preference shares, dividends or term loans, supported by an auditor’s certificate to the stock exchange.
4) the proposed instrument is unsubordinated/senior debt, secured by a first or pari passu charge on identifiable assets and rated at least “AA-” or above on the date of private placement.
Takeaways:
SEBI’s proposal addresses the cost and timing friction caused by mandatory merchant banker appointments, particularly where Small-value debt pricing is yield-sensitive and execution delays can affect viability. If implemented, the exemption could make eligible issuances faster, cheaper and more market friendly. However, the relaxation is deliberately narrow and ring-fenced for regulated, seasoned and non-defaulting issuers issuing senior secured debt with at least “AA-” rating. For all other issuers, the merchant banker requirement would continue to apply.
Public comments may be submitted to SEBI until 17 September 2026.
For further details, please see:
SEBI consultation paper – Exemption from mandatory merchant banker appointment for Small-value debt
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