Sebi issues new bond regulations to reduce corporates' funding sources

Sebi issues new bond regulations to reduce corporates' funding sources

STOCK MARKET - The new regulations of Securities and Exchange Board of India(Sebi) on foreign holdings of rupeedenominated corporate bonds will reduce options for companies to diversify their funding sources, says a report.

Last week, the market regulator had said that foreign purchases of rupee-denominated corporate notes would only be permitted through auction once the foreign holdings reached 95 per cent of the cap.

"New, tighter regulations on foreign holdings of rupeedenominated corporate bonds and offshore issuance will reduce options for companies to diversify their funding sources, at least temporarily," Fitch Ratings said in a report.

The new norms will also prevent the use of certain complex transaction structures, which have recently gained popularity among corporate issuers, it said.

At present, the foreign portfolio investors can invest up to Rs 2,44,300 crore ($ 51 billion) in corporate bonds issued by domestic companies.

Foreign ownership is already above 95 per cent of the cap, which means these restrictions have come into effect, the report said.

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ARTICLE SOURCE – BUSINESS STANDARD