Operating Guidelines of Mechanism for issuance of debt securities on private placement basis through an electronic book mechanism

Transcription

1 Operating Guidelines of Mechanism for issuance of debt securities on private placement basis through an electronic book mechanism (Revised as on 7 th October, 2016) All Participants registered with the Exchange are hereby informed that the Exchange has made available BSE BOND with effect from 1 st July 2016 in line with SEBI circular no. CIR/IMD/DF1/48/2016 dated April 21, 2016 regarding Mechanism for issuance of debt securities on private placement basis through an electronic book mechanism. Detailed operating guidelines for BSE BOND platform were issued earlier on 1 st July The BSE BOND platform has been upgraded based on the feedback received from the Market Participants. Please find appended below the updated & revised operational guidelines for participation in BSE BOND of BSE in Annexure A. The guidelines also contain the requirements to be complied by Issuer(s)/ Arranger(s)/ Sub-Arranger(s)/Institutional Investor(s) and Other Investor(s) intending to select the Electronic Bidding Platform (EBP) of BSE for issuances of debt securities (Non-Convertible Bonds/Debentures) via private placement mechanism. For any further clarifications, Issuer(s)/ Arranger(s)/ Sub-Arranger(s)/ Institutional Investor(s) can contact following Exchange officials:- Name of Official Contact Number Department ID Mr Bhushan Mokashi Listing Sales Bhushan.mokashi@bseindia.com Ms Hemlata K Agarwal Listing Sales Hemlata.agarwal@bseindia.com Ms Amrin Memon Listing Sales Amrin.memon@bseindia.com Mr Kapil Jain Listing Sales Kapil.jain@bseindia.com

2 Annexure A Operational Guidelines for issuance of debt securities on private placement basis through an electronic book mechanism. General Instructions Electronic Book Mechanism: BSE BOND SEBI (Issue and Listing of Debt Securities) Regulations, 2008, govern public issue of debt securities and listing of debt securities issued through public issue or on private placement basis, on a recognized stock exchange. Regulation 31(2) of SEBI (ILDS) Regulations, 2008 inter alia provides that:- In particular, and without prejudice to the generality of the foregoing power and provisions of these regulations, such orders or circulars may provide for all or any of the following matters, namely: (a) Electronic issuances and other issue procedures including the procedure for price discovery; Accordingly, in order to streamline procedures for issuance of debt securities on private placement basis and enhance transparency to discover prices, issuance of debt securities on private placement basis through an electronic book mechanism shall be as per following operating guidelines. System Configuration / Requirements Electronic Book Mechanism The electronic book mechanism can be accessed from internet. The Url is as follows: Applicability of EBP 1. Electronic book mechanism would be mandatory: I. For all private placements of debt securities in primary market with a total issue size exceeding Rs.500 crores in a year, inclusive of green shoe option if any. II. III. The requirement of using electronic book mechanism shall also be applicable for those tranche issue(s) which individually may be less than Rs 500 crore, however is/ are part of a shelf offer, which including green shoe option, is more than Rs 500 crore in a financial year In case, the issuer comes with multiple issues in a financial year which are individually less than Rs. 500 crore however, the aggregate issue size in the same year crosses Rs.500 crore, in such scenario, issuer shall use EBP mechanism for any incremental private placement which takes aggregate issue size in the year equal to Rs.500 crore or above.

3 2. Optional: I. Issues with a single investor and where coupon rate are fixed. However arrangers acting as underwriters shall not be considered as single investors. II. Issues wherein the total issue size in a year is less than Rs.500 crores, inclusive of green shoe option, if any. Participants Enrolment 1. Issuer: The Issuer shall have the same meaning as assigned under regulation 2(g) of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (ILDS). The Issuer shall enter into agreement with BSE to access the BSE BOND platform. Issuer can register themselves with BSE from the below URL: 2. Arrangers Merchant Bankers, RBI registered Primary Dealers or any other registered intermediaries as notified by SEBI from time to time, may act as the arranger. Arranger shall be categorised as a Category 1 Participant. Arranger(s) shall be eligible to participate in the bidding for an issue only if they are mapped by the issuer. Arranger can register themselves with the exchange from the below URL: 3. Institutional Investors Institutional Investors shall be as defined in Regulation 106 X (b) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, Institutional investors shall be categorized as Category 2 Participants who shall enter bids on proprietary basis or may participate through an arranger/sub-arranger. All institutional investors classified as QIBs will be enrolled on BSE BOND platform subject to necessary KYC. All QIBs are allowed to participate in all issues conducted on the EBP platform. Investor can register themselves with the exchange from the below URL:

4 4. Sub-Arranger Any broker registered with SEBI and member of BSE may act as a sub-arranger. Sub- Arranger shall be categorized as a Category 1 participant. Sub-Arranger(s) shall be eligible to participate in the bidding for an issue only if they are mapped by the Arranger as allowed by the Issuer while setting up the Issue. Sub-Arranger are registered for the platform by default as they are registered with BSE as Broker member and their Login ID will be same as their Trading Member Code 5. Other Investors Non- QIB investors are not allowed for bidding directly on BSE BOND platform. These investors shall enter the bids only through Category 1 participants, subject to being classified by issuers as an eligible investor. Investor can register themselves with the exchange from the below URL: Bidding Parameters 1. Bid Timings: The placing of Bids/Orders by Participants will take place during Normal Trading Hours of the secondary market. i.e. 9AM to 5PM from Monday to Friday. The Bidding for a particular issue will not be allowed during bank holidays as mentioned in the RBI G-Sec Calendar (Mumbai) 2. Bidding Mechanism: I. Bidding Period: Bidding should be for a minimum of 15 minutes and can be extended for more than 15 minutes as per the issuer discretion, while the book can be kept open for a maximum period of 8 hours i.e. business hours of 9.00 am to 5.00 pm. Also extension in bidding period is permitted as long as such extension is within the business hours. II. III. Cooling Period: Cooling period should be for minimum of 10 mins and the maximum time can be decided by the issuer. Cooling Period is optional in case an Issuer does not intend to go for Negotiation. Negotiation period: The timing or time interval for Negotiation to the participants can be defined by the Issuer as per its discretion. The Issuer shall also disclose the Negotiation Method whether Sequential or Non-Sequential

5 Pre-Bid Procedure 1. Issue Initiation: Issuer will have to enter in basic details pertaining to the issue, which will be viewed by the respective participants of the issue Details pertaining to Issue Initiation will include various details such as: Issue Name Issue Size Face Value Description of Instrument Tenor Notification Timing (This field will allow an Issuer to define the time for sending out notification to the eligible participants prior to the mandatory 1 hour period where systems sends out notification automatically) Rating Coupon frequency Interest payment type Green Shoe Option Secured Type Guarantee Type Put option Call option 2. Bidding Details: Issuer will further key in the Bidding details based on which the eligible participants will be able to place their bids. The bids will qualify only with respect to the parameters set in the system for receipt of bids like: Bid Open Date/ Bid Close Date Bid Start Time/ Bid End Time Pay-In date From/ To Deemed Allotment Date Bidding type (Fixed Rate/Yield based/price Based) Bid Book Type (Open/Close) Minimum Bid Size Multiple of Single Bid L1 Method (This will be based on the type of Bidding Type selected) Minimum Bid Amount for L1 Issue Status (Inactive mode will allow the Issuer to create & save the Issue prior to going live. The Issuer can make its Issue live once the status is changed to Active) Initiation of Negotiation (Issuer also has the option to opt for Negotiation post the Bid Close Time, even though it is selected as No initially while creating the Issue) L1 is the bidder who has placed the best quote for the Issue. L1 is determined based on the L1 criteria defined by the user while creating the Issue i.e: The Minimum Bid Amount for L1 and the L1 Method selected

6 3. Mandatory Uploads: Issuer shall be required to upload Private Placement Memorandum (PPM), PPM is simply a Term Sheet or a Shelf Document or an Information Memorandum relating to the issue(s). Optional Uploads: Credit Rating rationale, Consent letter from Debenture Trustee, In- Principle approval of stock exchange, Board Resolution or any other documents as required by the Investor(s) and the mapped Arranger(s) if any are optional for uploading and up to the discretion of the issuer. 4. Minimum time for issue activation and notification to the participants: The Issuer should set up the issue and activate the issue at least one hour and 15 minutes prior to the desired Bid Start Time. 5. Market Participants for the Issue: Arrangers as mapped by Issuer post the issue is created, such mapping has to be done one hour prior to the Bid Start Time Sub- Arrangers are mapped by Arrangers to place bids for an Issue. An Arranger will be allowed to map a Sub-Arranger only if the Issuer facilitates the Arranger to do so while setting up the Issue All the Qualified Institutional Buyers as per Regulation 2 (zd) of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and other eligible bidders (as determined by the Issuer) may participate in the bidding process. Provided that in case the issuer is Non-Banking Financial Companies which are registered with Reserve Bank of India and Housing Finance Companies registered with National Housing Bank, the Qualified Institutional Buyer, eligible bidders (as determined by the issuer) and other participants enrolled with BSE may participate in the bidding process subject to them complying with RBI requirements, if any prescribed in this regard. 6. Information Available to the Market participant: Only the eligible participants will have access to PPM and issue specific information. The bidding details (bidding time, cooling period, negotiation etc.) will be decided by issuer. I. Bidding procedure: Issuer will specify duration for Initial Bidding, the timing for Negotiation can be entered during the cooling period as well in case an Issuer would like to opt for Negotiation post evaluating the initial bids received. Issuer will be allowed to extend the Bid Close Time as long as such extension is within the business hours. However, Provisional allocation and Final allocation can be carried out post the business hours. II. Bid Entry:

7 Bid entry can be done by entering Amount in (Rs in Crs) and Coupon/Price. A bidder will only be able to enter in the Amount if it s a Fixed Rate Issue and will be able to enter in Coupon and Amount in a Yield Based (coupon discovery) issue. Participants will be allowed to enter multiple bids i.e. single participant may enter more than one bid. Only Arrangers/Sub-Arrangers that are mapped to an Issue will be allowed to enter bids on behalf of their investors (QIB and Non-QIB). Arrangers/Sub Arrangers mapped to an Issue are also allowed to bid on propriety basis All QIBs registered with the BSE BOND platform will be allowed to bid on propriety basis Provision for modification and cancellation of the respective bid made by the bidder will be allowed only during the Bidding Period BSE shall provide a facility for generation of acknowledgement number against such bids III. Bid Close Time: Issuer can view a report for all the bids received post the Bid Close time and the Market Picture of bids received during bidding Acceptance of the Bids will be at the discretion of Issuer. Post the bidding being closed, the Issuer has an option to:- Withdraw the issue or Initiate a Negotiation or Proceed with Allocation IV. Negotiation Window: Negotiation will start as per the time mentioned by the Issuer which shall be post the Cooling Period. The Negotiation option will allow the bidder with the following options: If Option selected: Rate Amount Cut off at L1 The Coupon/ Price will be freezed as per L1 rate and won t allow a bidder to input any rate A Bidder won t be able to submit a bid with an amount below the Minimum Bid Size mentioned by Issuer in the Issue Details Cut off above L1 The Offer Rate to be specified should be higher than the L1 rate. Bidder will have to match the offer Rate as specified by the issuer and won t be allowed to input any rate A Bidder won t be able to submit a bid with an amount below the Minimum Bid Size mentioned by Issuer in the Issue Details

8 The Offer Price to be specified should be lower than L1 price. Bidder will have to match the Offer Price as specified by the issuer The method to determine L1 and select the Negotiation Method (Sequential or Non- sequential) is up to the Issuers discretion Negotiation will start on the basis of time slots provided by the Issuer to the respective participants. The Bidder at each level will be allowed to only modify the bid (Increase/Decrease the Amount, the amount can be decreased only up till the minimum bid size mentioned) any number of times, till the allocated time slot for negotiating is active. An Issuer can view the Bid Book in the form of Pre and Post Negotiation, also the Bid details for Negotiation will be as per the Final Negotiated Bids received. Once opted for Negotiation the Issuer can withdraw the Issue only if the Issue size is not fully subscribed. Issuer can also conduct multiple rounds of Negotiation to receive best response for its Issue. The bids received while conducting multiple rounds can be viewed in the View Log option provided in the L1 report. V. Post Bidding procedure: The Issuer will have to do the Bidding Closure, on doing so no further Bidding will be allowed i.e: in case of Negotiation, the Bidding Closure should be done post the Negotiation Acceptance of bids is at the Issuers discretion, however if the issue is subscribed by opting for negotiation the issuer will have to do the allocation to such bids as its discretion. The provisional allocation done by the Issuer will be visible to the Arrangers and Investors to whom the allocation has been made in the Allocation Report (The allocation to a particular bid can be seen only by the respective bidder of such a bid) On receipt of Allocation from Issuer, the Arranger/Investor has a provision to upload the Investor details before the Issuer proceeds with Final Allocation. Once the Investor Details are received, the Issuer can proceed with the Final Allocation. On successful completion of the Final Allocation and Issuer should then proceed with Issue Closure VI. Reports Bid Book will allow an Issuer to view all the bid(s) received for an Issue. Mapping Reports will allow an Issuer to view the Arranger(s) and Sub-Arranger(s) mapped for bidding for particular issuer

9 Market Picture will provide a general overview of the bids received (without disclosing the individual bid) to the Issuer and the participants of the Issue L1 Report will allow one to view the top bids received for an issue, the report will also display the negotiated bids of the participants at the time of negotiation Issue Reports will serve as an MIS for the Issuer to view all its past issues created on the BSE BOND platform Allocation Report will provide the Issuer with an MIS of the provisional and final allocation made Order Book will allow the bidder to modify/cancel/negotiate the respective bid placed initially. The modification/ cancellation can be carried out only during the bidding period and negotiation can be done only during the negotiation timing mentioned by the Issuer Kindly note, only Market Picture will be viewable during the bidding period and once the Bidding period is over all the other reports will show the respective data. VII. Post Allotment Details: BSE on the website shall, disclose the issue size, yield, ISIN, no. of Investors, category of investor etc. as per SEBI circular. This disclosure by BSE is made on the basis of details received from the Issuer on successful completion of the Final Allocation. For total issue size being below Rs.500 crore in a year, issuer shall report the details as per the format specified by the BSE for the issues conducted off the platform. BSE shall upload the above data provided by the Issuer on its website to make it available to the public.