SEBI Allows Zero-Coupon Debt Securities at Reduced Denomination of Rs. 10,000

Circular No. HO/17/11/24(1)2025-DDHS-POD1/I/491/2025, Dated: 18.12.2025

1. Regulatory Background

SEBI had earlier amended the framework governing the issuance of debt securities and non-convertible redeemable preference shares (NCRPS) to permit issuance at a reduced face value of ₹10,000, primarily to enhance market accessibility and liquidity.

Building on this reform, SEBI has now further liberalised the issuance conditions under the Non-Convertible Securities (NCS) Master Circular.

2. Permission to Issue Zero-Coupon Debt Securities

Under the revised framework:

Issuers are now permitted to issue zero-coupon debt securities:

With a fixed maturity, and
Without any structured obligations

This is in addition to the already permitted:

Interest-bearing debt securities, and
Dividend-bearing non-convertible redeemable preference shares

The inclusion of zero-coupon instruments expands the range of permissible debt structures under the reduced face-value regime.

3. Conditions and Safeguards

The relaxation applies only where the zero-coupon debt securities:

Have a fixed and clearly defined maturity, and
Do not involve structured or complex payout obligations

This ensures that reduced face-value issuances remain plain-vanilla and transparent, limiting risk for investors.

4. Applicability and Scope

The revised norms apply only to private placement issues of debt securities.
All other provisions of the NCS Master Circular remain unchanged.
The circular applies to all private placement issues of debt securities that are proposed to be listed, from the date of issuance of the circular.

Public issue norms are unaffected by this amendment.

5. Regulatory Intent

SEBI’s move aims to:

Broaden the range of debt instruments available at lower face value
Improve accessibility for investors, including smaller institutional and sophisticated investors
Enhance flexibility for issuers in structuring debt instruments
Maintain simplicity and transparency by disallowing structured obligations

The reform aligns with SEBI’s broader objective of deepening the corporate bond market while preserving investor protection.

6. Implications for Issuers and Market Participants

6.1 For Issuers

Greater flexibility to issue zero-coupon instruments under private placement
Ability to tailor funding strategies without recurring interest obligations
Opportunity to attract a wider investor base through reduced denomination

6.2 For Investors

Access to a broader mix of fixed-income products
Clear visibility on maturity and redemption value
Continued regulatory safeguards against complex structures

6.3 For Intermediaries

Need to update structuring, disclosure, and listing documentation
Ensure compliance with eligibility conditions under the NCS Master Circular

7. Key Takeaway

SEBI’s amendment enables issuance of zero-coupon debt securities at a reduced face value of ₹10,000 under private placement, while keeping the broader NCS framework intact. The change enhances market flexibility without compromising on simplicity or investor protection.