Higher threshold for debt-listed entities on anvil

New Delhi: Markets regulator Sebi on Monday proposed a framework to reduce the compliance burden of companies with large debts, by raising the threshold for identifying High Value Debt Listed Entities (HVDLEs) to Rs 5,000 crore from the current Rs 1,000 crore.

The move would reduce the number of entities classified as HVDLEs from 137 to 48, effectively bringing down around 64 per cent of companies currently falling under the category, Sebi said in its consultation paper. The proposal aims to reduce the compliance burden and promote ease of doing business. Corporate governance norms for HVDLEs were first introduced in September 2021, on a comply-or-explain basis until March 31, 2025 and became mandatory from April 2025. These norms apply to all entities with listed outstanding non-convertible debt securities of Rs 1,000 crore or more.

Following the rollout of these rules, several market participants approached Sebi seeking a higher threshold for classification. Once designated as an HVDLE, a company is required to comply with governance standards similar to those of equity-listed firms, including the submission of quarterly governance reports, annual secretarial compliance reports, and adherence to board composition norms. Industry representatives argued that meeting these requirements increases costs substantially.

The need for additional independent directors, committee-specific experts, and higher legal, secretarial, and audit expenses adds to the burden, especially for NBFCs and frequent issuers that primarily raise funds through private placements.