[Opinion] SEBI’s Revised Listing Rules for HVDLEs – Key Changes

Aparna Ravi, Kinnari Sanghvi & Manan Sheth – [2025] 174 taxmann.com 185 (Article)

The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) provide for the various compliance actions and reporting requirements for entities who have listed equity shares or other specified securities and/or non-convertible securities on the stock exchange. The Securities and Exchange Board of India (“SEBI”) recently amended the Listing Regulations by way of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2025 which has become effective as of March 28, 2025 (“Listing Amendment Regulations”).

The changes introduced by the Listing Amendment Regulations primarily provide for additional reporting and compliance requirements for companies that have listed only non-convertible securities and qualify as a “high value debt listed entity” under the Listing Regulations. Previously, all high value debt listed entities needed to comply with Chapter V of the Listing Regulations, regardless of whether they had listed equity shares or other specified securities. Pursuant to the Listing Amendment Regulations, a new Chapter VA has been introduced that prescribes additional requirements for those high value debt listed entities that have only listed non-convertible debt securities. Such entities are now required to comply with the provisions of both Chapter V and Chapter VA of the Listing Regulations.

1. Analysis of the Key Changes Introduced by Way of the Listing Amendment Regulations

Revised thresholds for classification as a “high value debt listed entity”

Regulation 15 of the Listing Regulations previously classified a listed entity which had listed its non-convertible securities with an outstanding value higher than INR 5 billion as a high value debt listed entity. Such threshold for classification as a high value debt listed entity has been relaxed and entities with listed non-convertible securities with an outstanding value higher than INR 10 billion shall now be classified as high value debt listed entities (“HVDLE”).

Any entity which meets the requirements for a HVDLE (due to the revised thresholds highlighted above), has been mandated to comply with the relevant provisions of the Listing Regulations within six months of the date of such trigger. Further, compliance with this requirement is required to be disclosed in the corporate governance compliance report on and from the third quarter following the date of the trigger.

The erstwhile Listing Regulations did not provide for any enabling provision for an entity once classified as HVDLE to exit such classification. An important revision incorporated by way of the Listing Amendment Regulations is the inclusion of a sunset clause pursuant to which entities which were earlier classified as HVDLE will cease to be classified as HVDLE in case the value of the outstanding listed debt securities, as of March 31, reduces and remains below the specified threshold of INR 10 billion for a period of three consecutive financial years.

Corporate governance norms for listed entities which have only listed non-convertible securities

The Listing Amendment Regulations have introduced a new Chapter VA which provides for the corporate governance norms for HVDLEs which have only listed non-convertible securities and have not listed equity shares or other specified securities. A specific explanation has also been inserted under Regulation 15(1A) providing that if a HVDLE lists “specified securities” (which includes equity shares), the provisions of Regulation 15 to 27 of the Listing Regulations shall apply to such entity.

The corporate governance norms specified under Chapter VA are largely similar to those previously prescribed for HVDLEs that have listed equity shares and other specified securities. However, Chapter VA recognises the distinction in compliance requirements for HVDLEs that have only listed debt securities vis-à-vis HVDLEs that have both listed debt securities as well as equity shares or other specified securities. Some of the key changes are:

(i) pursuant to Regulations 62G, 62H and 62I of Chapter VA of the Listing Regulations, HVDLEs which have only listed debt securities have been given the discretion to either constitute a Nomination and Remuneration Committee, Stakeholders Relationship Committee and a Risk Management Committee, respectively, or to entrust the functions of such committees to the Board of Directors; and

(ii) Regulation 62K mandates HVDLEs which have only listed debt securities to obtain prior approval of audit committee for all related party transactions (“RPTs”) and the approval of shareholders for all material RPTs, along with an additional obligation on such HVDLEs to obtain no-objection certificates from the debenture trustee and debenture holders. Specifically, before entering into a material RPT or effecting any material modification to an existing RPT, and before obtaining the approval of the shareholders, such HVDLEs must obtain no-objection certificates from the debenture trustee of listed NCDs and, through the trustee, from the holders of such listed NCDs who:

(a) are not related parties of the HVDLE; and

(b) collectively hold at least 50% in value of the outstanding listed NCDs (on the basis of voting/e-voting).

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