Introduction: Discover the evolving SEBI regulations on “Large Corporates,” outlining criteria, exclusions, and compliance frameworks. Explore the recent amendments, effective April 1, 2024, impacting borrowing, credit ratings, and penalties. Stay ahead in understanding the responsibilities of listed entities and stock exchanges in implementing these changes.
“Large Corporate” As per SEBI Regulation:
EARLIER – As per SEBI Regulation SEBI/HO/DDHS/CIR/P/2018/144 dated 26th November 2018 Large Corporates means all those listed Entities;
1. Other than Scheduled Commercial Bank
2. Have their specified securities or debt securities or non-convertible redeemable preference share, listed on a recognized stock exchange(s) in terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
3. Have an outstanding long-term borrowing of Rs 100 crores or above, where outstanding long-term borrowings shall mean any outstanding borrowing with an original maturity of more than 1 year
4. Having a credit rating of “AA and above
EXCLUDES –
- External Commercial Borrowing
- Inter-corporate borrowings between a parent and subsidiaries.
RECENT AMENDMENT – As per SEBI Regulation SEBI Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/172 dated October 19, 2023, Large Corporates means those All those Listed Entities;
1. Other than Scheduled Commercial Bank
2. Have their specified securities or debt securities or non-convertible redeemable preference share, listed on a recognized stock exchange(s) in terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
3. Have an outstanding long-term borrowing of Rs 1000 crore or above, where outstanding long-term borrowings shall mean any outstanding borrowing with an original maturity of more than 1 year.
4. Having a credit rating agency of AA/AA+/AAA
EXCLUDES –
- External Commercial Borrowing
- Inter-corporate borrowings between a parent and subsidiaries
- Borrowing arising on account of Interest Capitalization
- Borrowing for schemes of arrangement involving Mergers, Acquisition and Takeovers
- Grant, Deposit or any other funds received as per guidelines or direction of the Government of India.
Applicability of Framework –
1. The Framework will be Applicable from 1st April 2024 for Large Corporates having their financial year from April to March.
2. For Large Corporate have their financial year from January to December shall have their effective date on 1st January 2024.
3. The large Corporations shall raise not less than 25% of their Qualified Borrowing by way of issuing Debt Securities.
4. From the Financial Year 2025 entities identified as Large corporate should Comply with the requirement of mandatory qualified borrowing in a financial year shall met over a contiguous Block of three years.
5. If at the end of three years, there is a shortfall in the requisite borrowings, a monetary penalty of 0.2% percent of the shortfall in the borrowed amount is levied.
6. The market regulator has replaced the term “incremental borrowings” with “qualified borrowings”.
Note: Qualified Borrowings for the Financial Year shall be determined as per the audited accounts for the year filed with Stock Exchange. Qualified Borrowing shall mean incremental borrowing between two Balance Sheet dates having original maturity of more than one year but not includes the borrowing excluded from the recent amendments.
Responsibilities of Stock Exchange –
1. The Stock Exchange shall look for the smooth execution of the above amendments by putting all necessary systems and infrastructure into Implementation.
2. The Stock Exchange shall put in place necessary systems and Infrastructure for implementation of the Circular.
3. The Stock Exchange from time to time makes such amendments in the relevant bylaws, rules, and regulations for proper coordination and uniformity for the implementation of the above direction.
4. All the Listed Entities should submit their financial results as per Regulation 33 and Regulation 52 of LODR regulation the Stock Exchange will determine
5. For LC having a financial year from April to March by June 30, and
6. For LC having a financial year from January to December by March 31, the list of LC for the Financial year
7. The Stock Exchange shall place the list of LC on its Website.
8. The Stock Exchange via email notifies all the listed Entities identified as LC to comply with the requirements.
Conclusion: As of April 1, 2024, new SEBI regulations redefine “Large Corporates,” affecting borrowing norms and credit rating requirements. Dive into the details of compliance frameworks and the responsibilities of stock exchanges. Ensure your organization aligns with these regulations to avoid penalties and stay in accordance with the dynamic landscape of financial regulations.
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