SEBI Proposes Zero-Coupon Bonds & NCRPS at Reduced Face Value

Draft Circular SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2025/XXX; Dated: 01.08.2025

SEBI Proposes Inclusion of Zero Interest/Dividend Instruments

The Securities and Exchange Board of India (SEBI) has released a proposal to broaden the scope of eligible securities that can be issued at a reduced face value. As per the draft circular, debt securities or non-convertible redeemable preference shares (NCRPS) that carry zero interest or zero dividend may soon be allowed to be issued at a face value of Rs 10,000. This move aims to provide issuers with enhanced flexibility in structuring financial instruments.

Facilitating Issuance at Reduced Face Value

Currently, only specific instruments qualify for issuance at a lower face value under SEBI’s regulations. The inclusion of zero-coupon debt instruments and non-convertible preference shares in this category will allow entities to structure fundraising instruments that are both cost-efficient and suitable for various market conditions. This proposal is particularly relevant for issuers looking to optimise capital raising without recurring interest or dividend obligations.

Boost to Innovative Capital-Raising Structures

The initiative is expected to encourage financial innovation and support corporate fundraising, especially for start-ups and infrastructure players that may prefer zero-coupon instruments for long-term financing. By issuing these instruments at a reduced face value, companies can appeal to a broader base of investors while simplifying repayment terms. This could also help deepen the Indian debt market and improve liquidity in certain segments.

Public Comments Invited by August 21, 2025

SEBI has invited public comments on the proposed changes, encouraging stakeholders including issuers, investors, and market intermediaries to provide feedback. The draft circular is open for consultation until August 21, 2025. Post consultation, SEBI may finalise the framework and introduce formal amendments to its regulations to implement the proposal.

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