The Securities Exchange Board of India on Thursday proposed simplifying the corporate debt issuance process with a view to reducing costs and enhancing transparency in bond offerings.

In a consultative paper on the proposed Draft Sebi (Issue and Listing of Debt Securities) Regulations, 2008, The stock market regulator said they provide for rationalised disclosure requirements and a reduction of onerous obligations attached to such issues.

It said the draft regulations were aimed at making a rationalised and stand-alone regulation for providing an enabling regulatory framework for the corporate debt market. "Modifications have been aimed at reducing time and unnecessary burden of issuance of these securities and according flexibility to issuers to structure their instruments, without diluting areas of regulatory concern," the draft paper said.

Sebi has invited public comments on the draft regulations by January 23 through e-mail and by January 19 through post. The regulations cover issuance and listing of debt securities which are not convertible, either in whole or in part into equity instruments.

Sebi said the disclosure requirements would be bifurcated into a more detailed and simplified one, depending on whether the equity securities of that company were already listed.

If a company whose shares are already listed wants to issue debt instruments, minimal incremental disclosures would be sufficient, as large amount of the company related information is already in the public domain.

For companies whose equity is not listed, raising of debt capital would require detailed disclosures, but that would also be fewer than equity securities disclosures.

Sebi said the proposed regulations would cut the regulatory burden on issuing companies without compromising on the rights of investors.

"Since vast amounts of company information is already available in the public domain on issuance of equity, the additional quantum of information needed when the same company comes out with a debt issue will be marginal," it said.

The regulator said that high levels of disclosure were important for equity offerings as equity was the residual interest of shareholders in a company, but the owners of debt instruments were by contrast, satisfied with timely payment of interest and capital and the solvency of the issuing company.

As part of the draft regulation, Sebi has proposed that issuers making public offers of debt securities would continue to file draft offer documents, which would be put on the Web sites of Sebi and exchanges or seven days.

Private placements, which will be listed, need not file an offer document, but will only be needed to comply with the disclosure norms and the listing conditions.

"Concern has been raised in the recent past over the relatively limited success of primary corporate bond offerings," Sebi said.

Observing that most of the primary issuances were through private placement rather than public offer, it said concerns have also been raised over secondary trades. Due to lack of an active secondary market, only those investors willing to hold the debt to maturity were interested in investing in such securities.

"In addition, absence of adequate trading in corporate bonds also has resulted in lack of transparency in pricing of such securities," Sebi said.

The regulator said creating a vibrant corporate bond market was key to raising long-term resources for funding the country's infrastructure growth.