Large corporates get more flexibility on raising debt
corporates more flexibility on borrowing from the debt market. A higher monetary threshold of ₹500 crore has also been specified for defining large corporates, thereby reducing the number of entities that would qualify, Sebi said in a press release.
That's up from the current ₹100 crore.
In 2018, in line with that year's budget, Sebi said large corporates had to raise at least 25% of incremental borrowings during the financial year by issuing debt securities. The move was aimed at deepening the corporate bond market.
Following this, companies said raising funds from banks and financial institutions was a cost-effective option compared with raising funds via debt securities.
In most cases, meeting the one-fourth requirement had become costlier due to tightening liquidity and hikes in the benchmark rate, they said.
Besides, in certain industries, the government provides interest subsidy benefits on term loans, not available when funds are raised through debt securities. In the power sector, where tariffs are regulated, the cost of debt has a major bearing on tariffs.
«LCs (large corporates) are of the opinion that the decision to borrow funds at the best-prevailing rate, as per market conditions, may be best left to the entity concerned,» Sebi had said in a discussion paper in August.
