SEBI guidelines delay plans of corporate giants to tap markets

Mumbai: Corporates giants like Gas Authority of India (GAIL), Konkan Railway Corporation (KRC), LIC Housing Finance, Krishna Bhagya Jala Nigam (KBJNL) and Cauvery Neeravary Nigam (CNNL) will have to delay their plans to tap the capital markets due to the recent guidelines on private placements issued by Securities and Exchange Board of India (SEBI). It is estimated that over Rs 1,800-crore worth of bond issues are currently being held up.

They were meant for various infrastructure projects and include the Rs 500-crore issue of GAIL and Rs 550-crore issues each of KBJNL, CNNL and other state-owned bond issuers, including the Andhra Pradesh-owned enterprises.

SEBI, in its recent guidelines issued on 30 September, said debt securities issued on a private placement basis by listed companies and sought to be listed on a stock exchange have to carry a credit rating of "not less than investment grade" from an agency registered with the market regulator. The SEBI circular stated that these norms have been issued by the markets watchdog to provide greater transparency to such issuances and to protect the interest of investors in such securities.

An official with UTI Bank's merchant banking division said as per the new SEBI guidelines, the corporates have to follow all the procedures applicable for an equity issue or an initial public offer issue of the corporates. "The charm of private placement issues is that the required funds become available within a span of a few weeks. The new SEBI norms are very complex and the private placement issue of corporates will take the same as required for an equity issue. Due to this, we are facing a delay in arranging funds for corporates like GAIL."

Says KRC finance director R K Sinha: "The procedures prescribed in the new SEBI guidelines will delay the fund mobilisation programme of the corporates. But SEBI still allows the corporates to go for one-to-one arrangement of funds from creditors." But merchant banking sources say the bond issuer can mobilise only a small portion of the required capital through a one-to-one arrangement.

Several state-owned institutions have already sought clarifications on the recent SEBI circular, which tightens debt private placement norms. According to an official with Darashaw Equity Research, the corporats have sought several details on whether the offer document has to be filed with SEBI before floating a debt placement and whether an investment banker has to vet the offer document.