INSITE - India- December 2025

SEBI MODIFIES CONDITIONS FOR REDUCED DENOMINATION OF DEBT SECURITIES

Summary: The Securities and Exchange Board of India (SEBI) has issued Circular No. HO/17/11/24(1)2025‑DDHS‑POD1/I/491/2025 dated 18 December 2025, amending the conditions under which issuers can offer debt securities at a reduced denomination. The change expands eligibility to include zero‑coupon debt securities alongside traditional interest‑bearing instruments, enhancing accessibility and flexibility in the corporate bond market.

In Detail: Under SEBI’s revised framework, issuers of privately‑placed debt securities and non‑convertible redeemable preference shares (NCRPS) can now issue these instruments at a reduced face value of ₹10,000, with expanded eligibility conditions. Previously, reduced denomination eligibility was limited to interest‑ or dividend‑bearing securities with fixed maturities and no structured obligations.

Under the updated conditions introduced by the SEBI circular:

• Zero‑coupon debt securities with a fixed maturity and no structured obligations are now eligible for issuance at the reduced denomination of ₹10,000 alongside traditional coupon‑paying instruments.

• The amendment applies to privately placed debt securities and NCRPS proposed to be listed, providing issuers with greater flexibility in structuring funding programmes.

This modification aligns with SEBI’s broader objective of deepening the corporate debt market, broadening investor participation, and allowing a wider variety of fixed‑income products to be made available at lower denominations.

Key Takeaways:

• Enhanced Market Accessibility: Allowing zero‑coupon instruments at lower denominations makes the corporate debt market more accessible to a wider range of investors, particularly those seeking fixed‑income exposure without periodic coupon payments.

• Greater Issuer Flexibility: Issuers can tailor debt instruments whether interest‑bearing or zero‑coupon—to meet financing needs while offering smaller‑denomination securities that appeal to broader investor segments.

• Market Development: The move supports SEBI’s ongoing efforts to deepen the bond market by expanding the menu of eligible instruments under the reduced denomination regime.

Key Links: SEBI | Modification in the conditions specified for reduction in denomination of debt securities