The capital market watchdog, SEBI, has cut the minimum ticket size for investment in bonds to Rs 10,000 from Rs 1 lakh earlier, marking one of the biggest reforms in the debt securities space.
In a circular issued on July 3, the regulator said that market participants have expressed that lower ticket size of debt securities may encourage more non-institutional investors to participate in the corporate bond market which in turn may also enhance liquidity.
“The issuer may issue debt security or non-convertible redeemable preference shares on private placement basis at a face value of Rs 10,000,” the SEBI order said.
With respect to General Information Document (GID), which is valid as on the ‘effective date of the circular’, the order said the issuer may raise funds through tranche placement memorandum or Key Information Document at a face value at Rs 10,000 provided at least one merchant banker is appointed to carry out due diligence in respect of such issuances.
“Necessary addendum shall be issued by such issuer to the shelf placement memorandum or General Information Document, as applicable,” it added.
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SEBI move for bonds market to open floodgates for retail investors
“SEBI’s recent move to slash the minimum investment for bonds is a game-changer, opening the floodgates for retail investors to wade into the previously exclusive pool of corporate debt. This isn’t just about lowering the entry barrier; it’s about democratising access to a market traditionally dominated by institutional players. By allowing investments as low as Rs 10,000, SEBI is essentially handing retail investors a golden ticket to diversify their portfolios and potentially reap higher yields than those offered by mundane fixed deposits,” says KS Roy, a personal finance expert.
However, as with any investment, caution is key, Roy alerts investors, who he feels should tread carefully, conducting thorough due diligence before diving in. “The bond market can be complex, and understanding the risks is paramount. But for those willing to do their homework, this could be the start of a rewarding journey into the world of corporate debt,” he emphasised.
SEBI move to cut bond investment ticket size a ‘defining moment’
Nikhil Aggarwal, Founder & CEO, Grip Invest, said that this is “a defining moment for the bond market akin to the launch of the zero-brokerage model in equity which transformed retail participation. 98% of all bond issuances amounting to 8.4 lakh crore in FY24 were privately placed and only 2% were public offers. By reducing the face value to 10,000, SEBI has made the entire bond market now available to retail investors.”
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The regulator move will provide investors with more options in terms of issuers, ratings, tenure and return on bonds, he said adding that lower face value will also help increase trading volume and hence enhance the liquidity in the market.
“Combined with enabling regulations, robust tech infrastructure and high-quality issuers, we have all the necessary ingredients to see a multi-fold growth in the market. Coming on the heel of India’s inclusion in global bond indices, FY25 is turning out to be the year of the bond,” Aggarwal said.