Strengthening the role of Debenture Trustees (DTs) to uplift fund raising in Corporate Bond Markets

Mr Pratapsingh Nathani, Chairman and Managing Director, Beacon Trusteeship Limited on SEBI's decision to strengthen the role of a debenture trustee (DT)

Over the last couple of years, we have seen a large number of defaults in Debt Capital Markets across the corporate sector irrespective of their ratings and after much diligence it was observed that in order to improve the depth of our Debt Capital Markets in India, the regulators needed to bring in some minor changes within its regulations & thus giving powers to DTs to independently evaluate and monitor the value of security / collateral and take quick enforcement action within the rules of the way Corporate India raises money through the Debt Capital Markets.

In order to protect the interest of the Debenture holders / investors, SEBI has now empowered Trustees and made them responsible to conduct & exercise its independent due diligence while creation of a charge against the debt capital being raised in the form of Non Convertible Debentures (NCDs / Debentures). This does away with dependence on the issuer or a third party like the issuer's CA to give their certification of security and shifting the onus on to an Independent Third Party licensed by SEBI i.e. the Trustee to conduct a due diligence of the Security being offered against the capital being raised through Debentures.

Furthermore, it also seeks to empower the Debenture Trustees to conduct ongoing and half yearly monitoring of assets and maintenance of adequate coverage of security value corresponding to the amount of money being raised through debentures by any company.

Moreover, the issuer of Debentures will need to set aside a certain amount (most likely 0.25%) from the money raised, in the form of an FD, duly lien marked in favour of the Trustees, till the maturity of the debentures to take care of any legal expenses that may arise for enforcement of the security offered by the issuing company. This helps the Trustees to react quickly and take swift action obviating any delay that may arise in taking a call on the procedure to enforce the security collateral offered.

Shares of 8K MILES SOFTWARE SERVICES LTD. was last trading in BSE at Rs.56.4 as compared to the previous close of Rs. 53.75. The total number of shares traded during the day was 114 in over 8 trades.

The stock hit an intraday high of Rs. 56.4 and intraday low of 56.4. The net turnover during the day was Rs. 6429.

Source : Equity Bulls

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