On May 22, 2024, the Securities and Exchange Board of India (SEBI) issued a Master Circular aimed at streamlining the private placement process for debt securities and related instruments through the Electronic Book Provider (EBP) platform. This circular consolidates and clarifies previous guidelines, ensuring a standardized and transparent approach to private placements, particularly for large issuances.
Mandatory Use of EBP for Large Private Placements
A key highlight of the circular is the mandatory use of the EBP platform for private placements of debt securities, non-convertible redeemable preference shares (NCRPS), and municipal debt securities when certain thresholds are met. Specifically, issuers must route their offerings through the EBP platform under the following conditions:
If it is a single issue of ₹20 crore or more, including any green shoe option.
For a shelf issue, where cumulative tranches in a financial year total ₹20 crore or more.
For a subsequent issue, if previous issues in the same financial year have already crossed the ₹20 crore mark.
This move targets increased transparency and price discovery for sizable private placements, preventing opaque deals and favoritism.
Optional Use for Smaller or Alternate Instruments
While the circular mandates EBP usage for larger issuances, it also gives flexibility to issuers:
Entities issuing securitised debt instruments, security receipts, commercial papers (CPs), or certificates of deposit (CDs) may voluntarily opt to use the EBP platform.
REITs (Real Estate Investment Trusts), SM REITs (Small and Medium REITs), and InvITs (Infrastructure Investment Trusts) can also choose to use the platform for the private placement of their units.
Even issuers planning debt, NCRPS, or municipal debt securities below ₹20 crore may utilize the EBP system voluntarily.
This hybrid model encourages wider adoption of the EBP platform without mandating it across the board, respecting the operational realities of smaller or alternative issuers.
Pre-Issue Disclosure Requirements
To further bolster investor confidence and regulatory oversight, SEBI has tightened disclosure norms for EBP-based placements:
Issuers must submit the Placement Memorandum and term sheet at least two working days prior to the issue opening date. For first-time EBP issuers, this period is extended to three working days.
These documents must include essential details such as the issue size, the green shoe option (if any), and a clear summary of the terms and conditions of the offering.
Green Shoe Provision Clarifications
SEBI has placed a cap on the green shoe option — it cannot exceed five times the base issue size. Moreover, issuers are required to disclose the green shoe option exercised vis-à-vis the base issue for each offering, and provide historical data on such options from the previous financial year. This disclosure enables investors to gauge the demand and issuer behavior over time, improving transparency.
Conclusion
SEBI’s May 2024 Master Circular represents a significant step in modernizing India’s debt capital market. By mandating EBP usage for large private placements and standardizing disclosure practices, the regulator aims to build a more transparent, efficient, and investor-friendly ecosystem. The optional flexibility for smaller issuers and alternate instruments ensures that innovation and accessibility are preserved while core transparency goals are met.
