The Capital Market Regulator, SEBI, in order to bridge the gap in the availability of information to investors, have vide circular dated November 21, 2019 tightened the disclosure norms for listed entities on defaults on payment of dues to Banks/ Financial Institutions.
Failure on the part of the corporates to meet up their financial commitments and the pile of NPAs ultimately leads to leads to an alarming situation for its stakeholders and putting a dent on investors’ confidence.
There is already a framework prescribed by SEBI with regard to default in payment of interest and principal obligation on Listed NCDs and NCRPs. However, under the extant law, there was no such disclosure requirement with regard to cases of default on payment of dues on loans from banks/ financial institution and unlisted debt securities.
The Regulator now has tightened the noose even in respect of the above and has provided for mandatory disclosures by listed entities on defaults on payment of dues to Banks/Financial institutions by listed entities.
The key highlights of the same are as follows:
✜ All the listed entities having any of the following securities listed:
- Equity Shares;
- Convertible securities;
✜The event based and quarterly disclosures prescribed in the said circular shall be applicable from the periods on and after January 01, 2020.
- Default in payment of interest / instalment obligations on loans, including revolving facilities like cash credit, from banks /financial institutions;
- Default in payment of interest / instalment obligations of unlisted debt securities.
“Default” for the purpose of this circular shall mean non-payment of the interest or principal amount in full on the date when the debt has become due and payable (‘pre-agreed payment date’).
Default in case of cash credit: If outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for more than 30 days.
- Format for event based disclosure is prescribed under Para C1 of the said SEBI circular;
- Format for quarterly disclosure is prescribed under Para C2 of the said SEBI circular
Earlier in August 2017 as well, the apex capital market regulator had prescribed the disclosure norms pertaining to defaults on payment of interest/ repayment of principal amount on loans from banks/ financial institutions, debt securities, etc. However, the implementation of said circular was withheld within a month of its notification.
Ever since the promulgation of the Insolvency Code, India Inc. has witnessed almost 28,770 cases of insolvency, and the numbers going northwards. Even, major market participants like ILFS, DHFL etc., have failed to meet their financial commitments, thus sinking the entire capital market graph and leaving a plethora of investors lamenting.
Thus, the need was much felt for apprising the existing as well as the prospective investor’s community about any such defaults by the Company, to enable them to take well informed investment decisions.
For further clarifications or information, you can reach us @
Ms. Anjali Aggarwal
Partner & Head – Capital Market Services
+91 11 40622230