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This article will study how the public issue of debt securities is done and its mode of issue.
SEBI is the Securities and Exchange Board of India established under SEBI Act, 1992. It is a regulatory body that controls the security market in India. The main objective of SEBI is to protect investors’ interest and develop the security market in India. It is a body that regulates the issue of securities and its mode of issue.
The public issue is an issue of securities in the market to attract investors for a subscription. The shares are offered for sale to raise capital from the public. The investor who wants to buy shares must have an application to the company, and then debt securities are allotted. The public issue can be further classified into IPO (Initial Public Offer) and FPO (Follow on Public Offer). Section 23 of the Companies Act, 2013 prescribes the provisions for issuing of securities.
A debt security is a debt instrument to buy or sell in the market before its maturity. The structure represents a debt owed by the issuer and an investor who is a lender.
The investors purchase it to have a return on their capital. The repayment depends on the one who issues to meet their promises; failure to which will lead consequences.
Interest payments associated with such securities also is a regular mode of income throughout the year. These payments are guaranteed and maintain the cash flow.
It can also act to diversify their portfolio. Investors can use these financial instruments to manage the risk of their portfolio.
Examples of debt securities include:
These can also come in collateralized securities, such as collateralized debt obligations (CDO), collateralized mortgage obligations (CMO), zero-coupon securities.
There are several modes through which bidding in the public issue of debt securities is done.
Modes of public issue of securities
UPI (Unified Payment Interface) is a mode of payment through which instant payment is made. It is developed by NPCI (National Payments Corporation of India).
A circular on 23 November 2020 was issued by SEBI that introduced the UPI (Unified Payments Interface) mechanism as an additional mode for making online applications for public issues of various securities. It mandates adding the UPI mechanism as an optional application feature for the public issues of debt securities opens after 1 January 2021.
An investor can also apply through the ASBA (Applications Supported by Blocked Amount) mode or SCBS (Self- Certified Syndicate Banks or Syndicate ASBA.
The circular has increased the responsibilities of the depository participants in the UPI process, inter alia:
The steps are:
Public issue of debt securities through the UPI mechanism is a step towards digitalization. The online and offline process is quite the same. The UPI mechanism brings ease of making an application for public issue of debt securities.
Read our article: All about SEBI (ICDR) (Amendment), Regulations, 2021
Completed BA LLB from JEMTEC, School of Law, Greater Noida (Affiliated to GGSIP University, New Delhi). I have an experience of about 2 years in various fields of corporate laws, but I have a keen interest in researching on legal issues and to gain knowledge. I always strive to bring the best to work on what I do.
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