SEBI guidelines for debentures issued for public subscription - December 9th, 2007 Issue of FCDs having a conversion

n period more than 36 months will not be permissible, unless conversion is made optional with put and call option. Compulsory credit rating will be required if conversion is made for FCDs after 18 months. Premium amount on conversion, the conversion period, in stages, if any, shall be predetermined and stated in the prospectus. The interest rate for above debentures will be freely determinable by the issuer. Issue of debenture with maturity of 18 months or less are exempt from the requirement of appointing Debenture Trustees or creating a Debenture Redemption Reserve (DRR). In other cases, the names of the debenture trustees must be stated in the prospectus and DRR will be created in accordance with guidelines laid down by SEBI. The trust deed shall be executed within six months of the closure of the issue. Any conversion in part or whole of the debenture will be optional at the hands of the debenture holder, if the conversion takes place at or after 18 months from the date of allotment, but before 36 months. In case of NCDs/ PCDs credit rating is compulsory where maturity exceeds 18 months. Premium amount at the time of conversion for the PCD, redemption amount, period of maturity, yield on redemption for the PCDs/NCDs shall be indicated in the prospectus. The discount on the non-convertible portion of the PCD in case they are traded and procedure for their purchase on spot trading basis must be disclosed in the prospectus. In case, the non-convertible portions of PCD/NCD are to be rolled over, a compulsory option should be given to those debenture holders who want to withdraw and encash from the debenture programme. Roll over shall be done only in cases where debenture holders have sent their positive consent and not on the basis of the non-receipt of their negative reply. Before roll over of any NCDs or non-convertible portion of the PCDs, fresh credit rating shall be obtained within a period of six months prior to the due date of redemption and communicated to debenture holders before roll over and fresh trust deed shall be made. Letter of information regarding roll over shall be vetted by SEBI with regard to the credit rating, debenture holder resolution, option for conversion and such other items, which SEBI may prescribe from time to time. The disclosures relating to raising of debentures will contain, amongst other things, the existing and future equity and long term debt ratio, servicing behavior on existing debentures, payment of due interest on due dates on terms loans and debentures, certificate from a financial institution or bankers about their no objection for a second or pari-passu charge being created in favour of the trustees to the proposed debenture issues. And any other additional disclosure requirement SEBI may prescribe from time to time. Most of the listing requirements are common for both equity and debt instruments in terms of disclosures with some additional provisions specified for the debt instruments. Until recently only infrastructure and municipal corporations could list debt before equity, subject to certain requirements. SEBI now permits listing of debt before equity subject to the condition that the debt instrument is rated not below a minimum rating of A or equivalent thereof.