NCDs Non-Convertible Debentures: Listing, Compliance and SEBI NCS Regulations

Non-Convertible Debentures (NCDs) are debt instruments that cannot be converted into equity shares. They are issued by companies to raise medium-to-long-term debt capital from investors. Listed NCDs are governed by SEBI (Non-Convertible Securities) Regulations 2021 (SEBI NCS Regulations) which replaced the SEBI (Issue and Listing of Debt Securities) Regulations 2008.

Types of NCDs

• Secured NCDs: Backed by specific assets of the issuer; preferential claim in case of default
• Unsecured NCDs: No specific security; subordinated to secured debt; higher coupon rate
• Tax-Free Bonds: Issued by government entities; interest exempt from income tax
• Market-Linked NCDs: Returns linked to market indices

Eligibility for Listed NCD Issuance

• Net worth > Rs. 100 crore (for public issue) or Rs. 4 crore (for private placement listing)
• No default on payments of interest/principal in past 3 years
• Credit rating: Minimum "investment grade" rating from SEBI-registered CRA
• SEBI ICDR registration for public issues

Debenture Trustee

All listed NCD issuances (public or private placement listing) require a SEBI-registered Debenture Trustee (DT). DT role:

• Execute trust deed with the issuer
• Monitor compliance with covenants
• Protect interests of NCD holders
• Enforce security in case of default
• Hold asset charge on behalf of investors

NCD Issue Process (Public Issue)

1. Board and shareholder approval (special resolution for public issue)
2. Credit rating from SEBI-registered CRA
3. Appointment of DT and execution of trust deed
4. SEBI filing and approval
5. Exchange listing application
6. Issue open for subscription (3-10 days)
7. Allotment and listing within prescribed timelines

Post-Listing Compliance

• Half-yearly payment of interest/principal as per schedule
• File audited financials within 60 days of year end with exchange
• Quarterly compliance report
• SEBI NCS Regulation 57: continuous disclosure obligations