Debenture Issuance -Recent developments & applicable compliances
– Vinita Nair, Senior Partner | vinta@vinodkothari.com
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Open in new tab Sustainable finance and GSS+ bonds: State of the Market and Developments
– Vinod Kothari and Payal Agarwal | corplaw@vinodkothari.com
The topic of sustainable finance has become as critical as sustainable development, since finance is the prerequisite for sustainable development. “Finance can play a leading role in allocating investment to sustainable corporates and projects and thus accelerate the transition to a low carbon and more circular economy. Moreover, investors can exert influence on the corporates in which they invest. In this way, long-term investors can steer corporates towards sustainable business practices.”[1] Hence, there is momentum towards organising funds and resources to transition from low energy efficiency to high energy efficiency, or renewable energy devices.
The expression “sustainable finance” is broader, as it encompasses the use of ESG considerations in financing decisions.[2] However, sustainability bonds are capital market instruments issued with a stated end-use. The term GSS+ bonds, which has recently been much in vogue, has G, S, S and then augmented by the + sign. The components of “GSS+” are as follows:
G : Green
S: Social
S: Sustainability
+ : Other labeled bonds, particularly, transition bonds, and depending on the usage, may also include sustainability-linked bonds.
The other labeled bonds may also include blue bonds, gender bonds, climate bonds, yellow bonds etc., although the same may already be covered under one of the components of the GSS bonds. For instance, blue bonds are taken as a part of green bonds, and gender bonds are taken as a part of social bonds.
GSS+ bonds are also called “thematic” or “labeled” bonds, with the use of their proceeds linked with the respective theme represented by such bonds. These expressions may be somewhat overlapping[3].
Read more →India to bring its debutante sovereign green bond
– Vinod Kothari | vinod@vinodkothari.com
This version: 31st January, 2023
Following the Sovereign Green Bond framework issued by the Govt of India, and in accordance with the calendar of events issued by RBI, the first tranche of the sovereign green bonds has been successfully issued by the Govt of India. Remarkably, the bonds achieved a greenium of 6 basis points against the expected 2-3 basis points, with the issue selling at a 5-6 basis points lower yield than the sovereign yield of similar tenure. The issuance was more than four times oversubscribed. The five-year bond was priced at 7.10% and 10-year bond at 7.29%, as per the auction results released by RBI. Indian government bonds with the same maturity period were trading at a yield of 7.16% and 7.35%, respectively, during the relevant period.
After the launch of the Sovereign Green Bond framework in November 2022, India has made its fast move for debuting with a Rs 16,000 crore green bond issuance, in two tranches, in January and February 2023, according to an RBI announcement. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy. The details of such projects are not immediately available; however, going by settled Green Bond Principles , which has also been adopted by India’s own sovereign framework, these projects will be identified and ascertainable disclosed by the issuer in the offer documents[1].
The GoI green bonds will qualify as SLR securities. They will also be available for investment by non-residents on automatic route. There are two maturities – 5 years, and 10 years, each with a value of Rs 8000 crores.
Green bonds are a part of a larger category of sustainability finance instruments, including social, sustainability, transition or other various thematic bond issuances. Green bonds constitute the largest components of the so-called GSS+ bonds.
Green bonds are issued by financial sector entities, direct users as also by sovereigns. The issuance by sovereigns, such as the Government of India in the present case, is fair recent – Poland is said to be the first country in 2016 to have issued a green bond.
Read more →Accessing Bond Markets by Large Corporate Borrowers
– Pammy Jaiswal & Nitu Poddar | corplaw@vinodkothari.com
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Registration of Security Interest and Rights of Secured Creditors under IBC
– Sikha Bansal, Partner & Neha Malu, Senior Executive | resolution@vinodkothari.com
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Read our writeups on the topic –
2022 Wrapped Up: Regulatory review of corporate law developments
– Payal Agarwal, Assistant Manager (payal@vinodkothari.com)
2022 has been a relatively stable year when it comes to Companies Act, save changes in the forms and filing procedures with increasing online processes, there has been significant traction on the part of SEBI. While Structured Digital Database (SDD) remained the buzzword for the listed entities with the stock exchanges requiring them to submit quarterly compliance certificates, the stress for proper controls on insider trading remained the focal point. For social enterprises, a landmark development was the introduction of the concept of Social Stock Exchanges, which seems to be shortly getting into operational mode.
We have tried to briefly cover the major developments in corporate laws during the year 2022. You may also refer to our brief discussion of the same in this youtube video. For updates relevant to the financial sector including the overseas investment norms, refer 2022 in retrospect: Regulatory activity in the financial sector. You may also refer to our quick round-up of regulatory developments in IBC in the year 2022.
Read more →2022 in retrospect: Regulatory activity in the financial sector
– Vinod Kothari | finserv@vinodkothari.com
It has been a brisk year in terms of activity – a busy regulator kept all regulated entities busier. This year marked the initiation of a new SBR framework for NBFCs – hence there was a lot of buzz in terms of understanding the new regulatory framework. The names of 16 Upper layer entities were declared by the RBI – consisting of 5 HFCs, 10 NBFC-ICCs, one CIC[1]. As is the design, UL entities are treated at par with banks in terms of regulatory intensity –hence, there is a LEF (large exposure framework), differential provisioning norms in case of standard assets, CET-1 capital requirement, mandatory listing etc.
Read more →IRDAI does comprehensive liberalisation of insurance regulations
– Neha Malu, Senior Executive | corplaw@vinodkothari.com
Admittedly with the ambition to develop an economy where every citizen has appropriate life, health and property insurance cover and every enterprise is supported by appropriate insurance solutions, and also to make Indian insurance sector globally attractive, Insurance Regulatory and Development Authority of India (‘IRDAI’) has made comprehensive changes in insurance regulations. IRDAI in its 120th meeting held on 25th November, 2022 had discussed at length the reason behind notifying such changes in IRDAI regulations and the same is expressed to fulfil its objective of achieving ‘Insurance for all by 2047’[1]. All the below discussed amendments were notified vide gazette notification dated 5th December, 2022.
The amendments notified are applicable with immediate effect and are generally speaking in the nature of liberalisation measures. Among the changes, a noteworthy amendment is doing away with obtaining prior approval of IRDAI every time an Insurance company goes for raising money by way of issuance of ‘Other forms of Capital’. Further, the maximum limit of money that can be raised through this route has also been increased which will provide for an easy flow of money into an insurance company. Additionally, allowing a subsidiary company to be a promoter in an insurance company subject to the specified compliances is another significant amendment that has been notified.
Read more →Regulatory framework for Online Bond Platform
– Abhirup Ghosh, Principal Advisor | abhirup@vinodkothari.com
Regulatory Framework for Online Bond Platform
Securities and Exchange Board of India (‘SEBI’) on November 14, 2022, notified the circular, ‘Registration and regulatory framework for Online Bond Platform Providers’[1] (‘Circular’) for regulating online bond trading platforms, applicable immediately. The notification comes in the backdrop of several unregulated online platforms offering services relating to dealing and transfer of listed/ unlisted securities between investors (mostly non-institutional). On the path to introduce the regulatory framework, the SEBI first issued Consultation Paper on Online Bond Trading Platforms – Proposed Regulatory Framework on July 21, 2022[2] (‘Consultation Paper’), a detailed write up on which can be found in another article named, ‘SEBI proposes to regulate private debt platforms’.[3] After gathering comments from public, the SEBI issued a couple of notifications – the first one is SEBI (Issue and Listing of Non-Convertible Securities) (Second Amendment) Regulations, 2022 (‘Amendment Regulation’) on November 09, 2022[4] to bar the intermediaries from facilitating transactions in listed debt securities without a stock broker license, and second one is the aforementioned Circular, which is the subject matter of discussion in this case.
This write-up tries to discuss the implications of the Circular, but before getting into that discussion, it is important to first understand the meaning and scope of the term, “online bond trading platform”.
Read more →Workshop on Large Corporate Borrowers
| Click here to register for the workshop- https://forms.gle/mmRSswBTjX79SR8c7 |
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