Sebi Eases Rules for Lower Face Value Zero-Coupon Bonds

Sebi has relaxed rules to allow issuers to sell zero-coupon debt securities at a lower face value of Rs 10,000, promoting accessibility. This change follows a previous circular permitting reduced face value for interest-bearing securities, thereby expanding the market for such financial instruments.

The Securities and Exchange Board of India (Sebi) announced a relaxation of rules on Thursday, allowing issuers to sell zero-coupon debt securities at a more accessible face value of Rs 10,000. This regulatory adjustment aims to broaden market participation and accessibility by reducing entry costs for these financial instruments.

Previously, a Sebi circular in July 2024 permitted companies to issue certain debt securities such as bonds or non-convertible redeemable preference shares with a lower face value, but this applied only to securities that provided regular interest or dividends. The recent update marks a shift in Sebi's approach to accommodate zero-coupon bonds.

Market participants have noted that while zero-coupon bonds do not offer periodic interest payouts, they are issued at a discount and redeemed at face value. Investors in these instruments profit from price appreciation over time, and the new rules facilitate such opportunities by lowering the investment threshold.

(With inputs from agencies.)