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.