SEBI may allow listing of unlisted non-convertible debentures


In an unprecedented move to ease the burden on Mutual Funds (MFs), Securities Exchange Board of India (SEBI) is contemplating to allow for the listing of many unlisted non-convertible debentures (NCDs) to be allowed a window for listing.

Prevailing laws

As per Section 71 of the Companies Act, 2013 (“Companies Act”) a company may issue debentures with an option to convert into shares, wholly or partly, at the time of redemption but cannot issue debentures with voting rights.As far as SEBI guidelines are concerned, the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (“Regulations”) deals with same. Amongst other requirements the Regulations require the aforesaid debt securities to be rated.

Mutual funds and NCDs

The prime object of this change appears to be aid the existing mutual funds (MFs) who have been bearing the brunt of the COVID-19 fiasco. These MFs will be able to tap in the market of listed NCDs to fill in their losses. It was on September 23, 2019, SEBI amended the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 that restricted MFs from investing in unlisted debt instruments Later a circular issued by SEBI on October 1, 2019 investments in unlisted NCDs not exceeding 10% of the debt portfolio of the scheme is allowed only when such unlisted NCDs have a which among others has a fixed maturity period without any options and is fully paid up upfront.


The proposal plans to infuse greater credibility to MFs and prop up the nervous markets of bringing necessary investments. However, it will be interesting to note whether SEBI follows the whole elongated procedure for listing of unlisted NCDs or shortens the process, particularly in the process of rating.

This update is by Rohitaashv Sinha, Advocate & Associate Partner at Agarwal Jetley & Co., Advocates & Solicitors. Contact: Email: or Mob: (+91) - 9999565393