Zerodha’s Nithin Kamath hails Sebi’s move which boosts retail participation in bond market | Mint – Mint

SEBI’s recent move to reduce the face value of corporate bonds has received praise from Nithin Kamath, the co-founder of Zerodha, who believes bonds, rather than stocks, are the right stepping stone for most Indians because they offer better returns than term deposits. with lower risk than stocks.

Capital market regulator Securities & Exchange Board of India (SEBI) on Tuesday decided to reduce the face value of corporate bonds to ₹10,000 of ₹1 lakh currently, which is expected to strengthen the participation of retail investors in the debt market.

“Companies can now issue bonds with a face value of ₹10,000. This is an important measure that can help attract individual participation in bonds. With all the changes in recent years, SEBI has done an incredible job in making bonds accessible to small investors,” Kamath wrote in an article on X.

Kamath had earlier spoken out against the non-availability of bonds to retail investors. Bonds are an HNI product and no one retails them, he had said.

“There were two major problems: 1. The availability of bonds with small denominations. Most bonds are issued through private placements and have a face value of ₹10,000,000+. Individual investors were therefore excluded. 2. All bond transactions had to be settled through the clearing companies, and they only accepted RTGS as a method of payment. The minimum transaction size therefore became ₹2 lakh + by default,” Kamath wrote in January 2023.

Read also: Sebi steps in to curb the dominance of mutual funds

However, Sebi has made some key changes that make it easy for retail investors to invest in corporate bonds, he noted.

Apart from reducing the face value, Sebi has standardized the date of registration for identification of eligible holders, harmonized the format of due diligence certificate provided by the debenture trustee and provided flexibility regarding publication of financial results in the journals for entities that have only listed non-convertible securities. .

Read also: Mint Explainer: Sebi fictitious turnover charge directive – implications and solutions

The Sebi Board also approved the proposal to provide option to issuers to issue NCDs or NCRPS through private placement mode at a reduced face value of ₹10,000 as well as the requirement to appoint a merchant banker.

These non-convertible debentures (NCDs) and non-convertible redeemable preference shares (NCRPS) must be simple interest or dividend bearing instruments. However, credit enhancements would be permitted for these instruments.

The regulator also approved the proposal that the record date for payment of debt securities principal repayment interest or NCRPS should be 15 days before the due dates of such payment obligations.

(With inputs from PTI)