In New Delhi, the markets regulator Sebi has proposed a new framework aimed at easing the compliance obligations for companies with significant debts. This plan involves raising the threshold for identifying High Value Debt Listed Entities (HVDLEs) from Rs 1,000 crore to Rs 5,000 crore. As a result, the number of entities classified as HVDLEs would decrease from 137 to 48, reducing the total by approximately 64 percent, according to Sebi’s consultation paper. The intention behind this proposal is to alleviate compliance burdens and enhance the ease of conducting business.
The corporate governance standards applicable to HVDLEs were first established in September 2021, requiring companies to comply or provide explanations until March 31, 2025, after which compliance will become mandatory in April 2025. These regulations currently apply to firms with outstanding non-convertible debt securities of Rs 1,000 crore or more. Following the introduction of these rules, several market participants have approached Sebi to advocate for a higher classification threshold. Companies designated as HVDLEs must follow governance standards akin to those of equity-listed firms, which includes submitting quarterly governance reports, annual secretarial compliance reports, and adhering to board composition requirements.
Industry representatives have contended that these obligations significantly escalate costs, as they necessitate additional independent directors, specialized committee experts, and increased legal, secretarial, and audit expenses, particularly for non-banking financial companies (NBFCs) and frequent issuers who mainly secure funding through private placements.
