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Recent amendments relating to Corporate Bonds

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– Vinita Nair, Aanchal Kaur Nagpal & Payal Agarwal | corplaw@vinodkothari.com

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Read our related resources here :

  1. Debenture trustees’ nominees on Corporate Boards: FAQs
  2. SEBI Consultation Paper on NCS regulations: Changes in Offer Doc. | Mandatory Listing | Disclosure of Issue expense
  3. SEBIs Consultation Paper on review of CG norms for a High Value Debt Listed Entities
  4. SEBI to provide debenture holders the right to object material related party transactions

Recent amendments relating to Corporate Bonds

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– Vinita Nair, Senior Parnter | corplaw@vinodkothari.com

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SEBI revises framework for green debt securities

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– Alignment with international standards and avoidance of greenwashing

– Payal Agarwal and Shreya Salampuria | corplaw@vinodkothari.com

Sustainability labeled bonds, more popularly known as GSS+ bonds, are looked upon as one of the primary means of raising funds towards sustainable development. The same has been discussed in Sustainable finance and GSS+ bonds: State of the Market and Developments. India is also not oblivious to the concept of GSS+ bonds, and companies in India have also been issuing such bonds, in one or more forms.

The issuance of green debt securities (“GDS”) in India was initially formalized through a circular issued  by SEBI in 2017 in this regard, later absorbed under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“ILNCS Regulations”) read with Chapter IX of the Operational Circular on the same. The regulatory framework for GDS in India has since been reviewed, and following a Consultation Paper on Green and Blue Bonds as a mode of Sustainable Finance (“Consultation Paper”) dated 4th August, 2022, SEBI, in its meeting dated 20th December, 2022 (“Board Meeting”) has approved amendments to the existing regulatory framework for GDS issuance. The press release of the Board Meeting reads as “in the backdrop of increasing interest in sustainable finance in India as well as around the globe, and with a view to align the extant framework for green debt securities with the updated  Green  Bond  Principles (GBP) recognised by IOSCO, SEBI undertook a review of the regulatory framework for green debt securities.”

Pursuant to the review of the regulatory framework for GDS, the following has been notified –

In this write-up, we intend to discuss the revised regulatory framework for GDS issuance in India.

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India to bring its debutante sovereign green bond

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– 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.

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