SEBI/HO/MIRSD/MIRSD_CRADT/CIR/P/2022/67 May 19, 2022
To,
Issuers who have listed and/ or propose to list Non-Convertible Securities, Securitised
Debt Instruments, Security Receipts, Municipal Debt Securities or Commercial Paper;
Recognized Stock Exchanges;
All Recognized Stock Exchange(s)
All Debenture Trustees registered with SEBI
Dear Sir/ Madam,
Sub: Revised format of security cover certificate, monitoring and revision in timelines
1. SEBI vide circular no. SEBI/HO/MIRSD/CRADT/CIR/P/2020/230 dated November 12, 2020,
and circular no. SEBI/HO/MIRSD/CRADT/CIR/P/2020/207 dated October 22, 2020 specified
format of security cover certificate, periodical monitoring and disclosures by Debenture
Trustee(s) and the requirement of creation of “Recovery Expense Fund” (REF).
2. Representations were received from issuers, Debenture Trustee(s) as well as other market
participants on issues related to operational challenges faced in complying with certain
provisions of circulars and have also given suggestions on strengthening the said
requirements. These challenges were also discussed in SEBI constituted Working Group on
“Unique Identification Code - Securities & Covenant Monitoring System” (‘Working Group’).
After taking into account recommendations of the Working Group and feedback from market
participants, SEBI amended the SEBI (Debenture Trustees) Regulations, 1993, SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 and SEBI (Issue and Listing of
Non-Convertible Securities) Regulations, 2021 and amendments were notified vide gazette
notifications dated April 11,2022. Accordingly, the provisions in the above mentioned circulars
have been revised as under.
Page 1 of 13
A. Revised format of the Security Cover:
3. In terms of regulation 54 read with regulation 56(1)(d) of SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, listed entities are required to disclose security
cover to Stock Exchange(s) and Debenture Trustee, and the format for preparation of security
cover for listed debt securities was prescribed as per Annexure A of SEBI Circular dated
November 12,2020. Based on the recommendation of the Working Group, the security cover
format has been revised and the format prescribed as per Annexure A of SEBI Circular dated
November 12,2020 stands rescinded. The revised format has been prepared to provide a
holistic picture of all the borrowings and the status of encumbrance on the assets of the listed
entity. The revised format for security cover is enclosed at Annexure I. Further, the obligations
of listed entity and Debenture Trustee with respect to preparation and submission of security
cover format are given as under:
3.1. Manner of preparation of security cover certificate by listed entity:
(a) The listed entity shall be required to prepare the security cover certificate on quarterly
basis and the statutory auditor of the listed entity shall certify the book values of the
assets provided in such certificate.
(b) The listed entity shall provide the values in the format under the market values column
including the reference date based on which the market value has been arrived at
and the certificate shall be submitted to Debenture Trustees). In case of
loans/receivables or any other asset offered as security and the market value is not
ascertainable in the specific quarter, then the listed entity may provide the carrying
value/book value as per the format for security cover is enclosed at Annexure I.
However, listed entity shall provide the justification for not providing the market value
along with certificate in that quarter.
(c) The frequency of valuation for asset classes offered as security by listed entity shall
be as under:
i. In case of asset classes, wherein frequency of valuation has been prescribed by
SEBI, the market value shall be provided, accordingly, in the security cover
certificate.
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ii. For the asset classes wherein there is no regulatory guideline on frequency of
the valuation of a specific asset class then it shall be on quarterly basis.
(d) In case, the issuer company has more than one Debenture Trustee for its listed debt
securities, the listed entity shall prepare such certificate separately for each
Debenture Trustee.
(e) The assets that are not paid for shall not be included as part of any security cover
calculation.
(f) In case, security cover offered for the debt securities comprises the assets of the
listed entity only, the security cover shall be prepared on standalone basis.
(g) In case, debt securities are secured by creation of charge on the assets of third
party/subsidiary/group/holding company; or assets of the listed entity are offered for
securing the debt securities issued by third party/ subsidiary/ group/ holding
company; or assets of the listed entity are offered for securing the other liabilities of
third party/subsidiary/group/holding company, the listed entity shall make disclosure
in two separate tables in the security cover format in the following manner:
i. Table for security cover on standalone basis for the listed entity and;
ii. Table on net summary basis on consolidated level in order to provide the
overall/ holistic picture of the borrowings and security cover provided by the
listed entity.
(h) Obligations of listed entity in case of third party/ subsidiary/ group/ holding company
assets being offered as underlying security:
i. The book value for security cover shall be certified by the statutory auditor of the
third party/ subsidiary/ group/ holding company with respect to third party/
subsidiary/ group/ holding company assets being offered as underlying security.
ii. In case, security cover comprises exclusive charge on third party/ subsidiary/
group/ holding company assets, the security cover certified by the statutory
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auditor of the concerned third party/ subsidiary/ group/ holding company shall
include details of such assets including the book value of such assets.
iii. In case, security cover comprises pari-passu charge on third party/ subsidiary/
group/ holding company assets, the security cover certified by the statutory
auditor of the concerned third party entity shall include details all encumbrances
on such assets.
(i) Further, in order to adequately capture details regarding other debt securities, viz.
unsecured debentures, subordinated debt, other debt issuances which fall in the
lower priority order in the waterfall mechanism for liquidation/ resolution proceeds, an
additional column named “Debt not backed by any assets offered as security” shall
be incorporated in the security cover certificate and the same shall be covered under
such column.
3.2. Manner of preparation and submission of security cover certificate by Debenture
Trustee(s):
(a) Debenture trustee on quarterly basis shall certify the market value of assets based
on the due diligence carried out by it or its appointed agencies and shall submit the
security cover certificate as per Annexure I. Debenture Trustee shall certify the
security cover in respect of the secured debt securities, to the extent charged held by
it.
(b) In case of reduction in the computed value of security cover in comparison to the
previous quarter or previously calculated security cover, the Debenture Trustee shall
record the reason for such variation in the security cover certificate. Clarification, if
any, in this regard, may be obtained by Debenture Trustee from listed entity.
4. Calculation of Security Cover Ratios: In order to standardize calculation of security cover
ratio as prescribed in Annexure I, the following formulas shall be used:
4.1. Exclusive security cover shall be calculated in the following manner:
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𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎𝑠𝑠𝑒𝑡𝑠 ℎ𝑎𝑣𝑖𝑛𝑔 𝑒𝑥𝑐𝑙𝑢𝑠𝑖𝑣𝑒 𝑐ℎ𝑎𝑟𝑔𝑒
𝐸𝑥𝑐𝑙𝑢𝑠𝑖𝑣𝑒 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐶𝑜𝑣𝑒𝑟=
𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑐𝑜𝑟𝑟𝑒𝑠𝑝𝑜𝑛𝑑𝑖𝑛𝑔 𝑑𝑒𝑏𝑡 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑐𝑐𝑟𝑢𝑒𝑑
4.2. Pari-passu security cover shall be calculated in the following manner:
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎𝑠𝑠𝑒𝑡𝑠 ℎ𝑎𝑣𝑖𝑛𝑔 𝑃𝑎𝑟𝑖−𝑝𝑎𝑠𝑠𝑢 𝑐ℎ𝑎𝑟𝑔𝑒
𝑃𝑎𝑟𝑖−𝑝𝑎𝑠𝑠𝑢 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐶𝑜𝑣𝑒𝑟=
𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑐𝑜𝑟𝑟𝑒𝑠𝑝𝑜𝑛𝑑𝑖𝑛𝑔 𝑑𝑒𝑏𝑡 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑐𝑐𝑟𝑢𝑒𝑑
5. Mandatory numbering of security cover certificates certified by statutory auditor and
chartered accountant (CA): The certificates certified by statutory auditor of issuer company
and by the empaneled independent CAs of the Debenture Trustee shall have the Unique
Document Identification Number(UDIN) generated in the manner prescribed by the relevant
regulatory authority.
6. Qualifications/disclaimers in security cover certificates: The Debenture Trustee shall
ensure that the qualifications/disclaimer (by whatever name called), does not impair the rights
of debenture holders in terms of security provided. Further, if the Debenture Trustee is of
opinion that such qualifications/disclaimer are affecting rights of debenture holders, the
Debenture Trustee shall be required to take corrective action in this regard.
B. Monitoring of covenants:
7. On quarterly basis, listed entity shall furnish the compliance status with respect to financial
covenants of the listed debt securities certified by statutory auditor of listed entity to Debenture
Trustee.
8. Regulation 15(f) of SEBI (Debenture Trustees) Regulations, 1993 mandates the Debenture
Trustee(s) to monitor the breach of covenants. In order to ensure effective monitoring,
Debenture Trustee(s) shall:
8.1. Establish board approved internal policies with respect to proactive and effective
monitoring of breach of covenants and such policy shall inter-alia include:
(a) procedure of monitoring of breach of covenants; and
(b) clearly defined role and responsibilities of the employees engaged in the process of
monitoring of breach of covenants including delegation of authority with respect to
process of monitoring of breach of covenants.
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8.2. Formulate the category wise list of covenants applicable to the particular issuance
defining the frequency of each covenant to be monitored viz. continuous, quarterly, half-
yearly, annual etc. The covenants may be categorized as financial covenants, affirmative
covenants, negative covenants etc. A guidance note for the list of covenants prepared in
consultation of Debenture Trustees is enclosed as Annexure II.
8.3. Initiate action in case of breach of covenants viz. accelerated payment, borrowing
restriction, not to declare dividend before payment, declaration of event of default etc. in
accordance with the terms of issue/ Offer Document/ Debenture Trust Deed.
8.4. Independently monitor any breach of covenants from continuous monitoring of any public
disclosure on Stock Exchange(s), company filings, news articles in electronic/ print media
or any information available in public domain apart from periodical information/
documents submitted by the issuer company.
8.5. Furnish a status report on its website and to the Stock Exchange(s) for further
dissemination on a quarterly basis. Such status report shall contain the covenants
breached in the preceeding quarter and the actions taken by the Debenture Trustee(s)
for the same as per the format prescribed vide SEBI Circular dated November 12,2020.
C. Disclosure by Debenture Trustee:
9. In order to enhance transparency with respect to no-objection certificate (NOC)/no-dues
certificate/consent/permission (by whatever name called) issued by Debenture Trustee(s) and
monitoring of listed entity, Debenture Trustee shall make the following disclosures on Stock
Exchange(s):
9.1. No-objection Certificate (NOC)/no-dues certificate/consent/permission (by whatever
name called) issued by Debenture Trustees to listed entity in terms of contractual
obligations arising out of offer document/ debenture trust deed or any other transaction
document related to debt securities, including the consent/ NOC for further borrowing by
issuer within 48 hours of issuance of such consent/ no-objection certificate by Debenture
Trustee to listed entity.
9.2. Any breach of the minimum security cover within 48 hours of such breach.
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D. Revision in timelines of submission of security cover certificate, valuation report and
Quarterly compliance report and regulatory compliance by Debenture Trustees:
10. Based on the representation received from Debenture Trustees to align the timelines for
submission and website disclosure of security cover certificate and quarterly compliance
reports with the timelines prescribed for submission of financial results for listed issuer
companies. In view of the above and to reduce cost of compliance with respect to preparation
and submission of valuation report and title search report, it has been decided that in partial
modification of the timelines mentioned in para 2 and 4 of SEBI Circular number
SEBI/HO/MIRSD/CRADT/CIR/P/2020/230 dated November 12, 2020, Debenture Trustees
shall submit:
10.1. the security cover certificate to the stock exchange and make website disclosure of the
security cover certificate and quarterly compliance report within 75 days from the end
of each quarter except last quarter of financial year.
10.2. the security cover certificate to the Stock Exchange(s) and make website disclosure of
the security cover certificate and quarterly compliance report for the last quarter of
financial year, within 90 days from the end of financial year.
10.3. the valuation report and title search report to the Stock Exchange(s) once in three years
within 75 days from the end of the financial year.
Further, in case of pari-passu charge, wherein multiple Debenture Trustees are holding
charge over the same assets, a lead Debenture Trustees may be decided amongst the
Debenture Trustees based upon the amount of the charge each Debenture Trustees
holds and accordingly the exercise of carrying out the valuation and preparation of the
valuation report may be carried out by the lead Debenture Trustees.
11. In partial modification of the timelines mentioned in para 5 of SEBI Circular number
SEBI/HO/MIRSD/CRADT/CIR/P/2020/230 dated November 12, 2020, timelines for the
following regulatory compliance is revised as under:
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Report Periodicity
Half yearly compliance report
Details of other activities carried out by Half-yearly basis within 75 days of the
Debenture Trustee(s) including type of activity, end of each half-year.
description of activity etc.
12. It is also clarified that the half-yearly compliance report shall be reviewed by the Board of
Directors of the Debenture Trustee prior to the submission to SEBI.
E. Monitoring of Recovery Expense Fund (REF) by Debenture Trustee(s):
13. SEBI vide circular numbered SEBI/HO/MIRSD/CRADT/CIR/P/2020/207 dated October 22,
2020 issued guidelines in respect of the contribution by issuers of listed or proposed to be
listed debt securities towards creation of REF. The circular, inter-alia, states that in order to
enable the Debenture Trustee(s) to take prompt action for enforcement of security in case
of ‘default’ in respect of listed debt securities, a REF shall be created which shall be used in
the manner as decided in the meeting of the holders of debt securities.
14. While the intent of the circular dated October 22, 2020 was aimed at creation of REF for both
secured as well as unsecured issuances as the Debenture Trustee has a fiduciary duty to the
debenture holders and the timely initiation of legal proceedings in case of default is one of the
key responsibilities of the Debenture Trustee irrespective of the nature of issuance, the usage
of the term “enforcement of security” created a confusion that the requirement was meant only
for secured issuances.
15. Accordingly, it is stated that the purpose of the creation of REF is to be read as for
“enforcement/ legal proceedings” instead of “enforcement of security”.
16. Further, with respect to independent verification of creation of REF by issuer companies,
Debenture Trustee(s) shall take confirmation from Designated Stock Exchange(s) or any other
independent source in writing regarding the creation of REF by the listed entity and shall not
rely solely upon the communication by the listed entity.
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17. The Stock Exchange(s) shall disclose the REFs created by the listed entities on half yearly
basis. Such disclosure shall also include the details of the Debenture Trustee to the debt
issue.
18. Applicability: The provisions mentioned in Part A and B with respect to ‘Revised format of
the Security Cover’ and ‘Monitoring of Covenants’ are applicable w.e.f October 1st, 2022.
Other provisions of this circular shall come into effect with immediate effect.
19. This circular is issued in exercise of the powers conferred upon SEBI under Section 11 (1) of
the Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation
2A of the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993
and Regulation 55 of the Securities and Exchange Board of India (Issue and Listing of Non-
Convertible Securities) Regulations, 2021 and Regulation 101(1) of the Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,
2015, Regulation 29 of the Securities and Exchange Board of India (Issue and Listing of
Municipal Debt Securities) Regulations, 2015 , Regulation 48 of Securities and Exchange
Board of India (Issue And Listing Of Securitised Debt Instruments And Security Receipts)
Regulations, 2008 to protect the interest of investors in securities and to promote the
development of, and to regulate, the securities market.
Yours faithfully,
Richa G. Agarwal
General Manager
Market Intermediaries Regulation & Supervision Department
Email id: richag@sebi.gov.in
Phone: +91-22-26449596
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Annexure I- Format of Security Cover
Column B Colum Colum Colum Column Column Colum Column Colum Column K Column L Column M Column N Column O
Column A n C i n Dii n Eiii Fiv Gv n Hvi Ivii n J
Exclusi Exclus Pari- Pari- Pari- Assets Eliminati (Total Related to only those items covered by this certificate
ve ive Passu Passu Passu not on C to H)
Charge Charg Charge Charge Charge offered (amount
Particular e as
in
s Securit
negative
y
)
Description Assets Other debt Carrying /book value Carrying value/book
of asset for shared by assets on amount for exclusive charge value for pari passu
w ce h r r i e t c i l f h a ic t t e a h t i e s D c te w e e t r b h b h t e i i t i f c s i i f n c h o g a r S d O e D t c h e u e b r r e t c D te w e e t r b h b h t e i i t i f c s i i f n c h o g a r c d p w e ( e a i d r h n b t r e i i c t i f c b i l p h h c u t a o a d f t s o l t h e d e s r i s e s u i r s (e t c P h w x h p e a c h a a r s l i r r u e c s i g d - h u i e s i n c t e p h o x d ( l a d n u c n m u s s lu e i o o d p s n r t e i a o e v c r r e e e i c E h V A x M a a b c r s l a a u g l s u r s e e e k s i d e s t f i s o v t o r e n a v a a ( B F s a s p a o s l c p l u a r e e l e i n t r c s t c a a e b i w n , l E e a h g b e i . l s r e e m D B a S r a n k R n o o e A k r t t P V A a c M a s r h l i s a u a p e r e r k a t g s e f s e o v t s i i r i u c w i o ( B s F h r a h o a n a l e a r r o p r g n e p t e c l a e m ic s E , a a c g b r e . k l r e e ta t a i D n s v B S s a a a R l e b u n t l A s e e k Value T (= o N K t ) a + l L +M+
issued issued issued & g items passu market value is not market value is not
other debt covered charge) applicable) applicable)
with pari- in column
passu F) Relating to Column F
charge)
Book Book Yes/ Book Book
Value Value No Value Value
ASSETS
Property,
Plant and
Equipment
Capital
Work-in-
Progress
Right of
Use Assets
Goodwill
Intangible
Assets
Intangible
Assets
under
Developme
nt
Investment
s
Page 10 of 13
Annexure I- Format of Security Cover
Loans
Inventories
Trade
Receivable
s
Cash and
Cash
Equivalents
Bank
Balances
other than
Cash and
Cash
Equivalents
Others
Total
LIABILITIE
S
Debt
securities
to which
this
certificate
pertains
Other debt
sharing
pari-passu
charge with
above debt
Other Debt
Subordinat
ed debt not to
be filled
Borrowings
Bank
Debt
Securities
Others
Trade
payables
Page 11 of 13
Annexure I- Format of Security Cover
Lease
Liabilities
Provisions
Others
Total
Cover on
Book
Value
Cover on
Market
Valueix
Exclusiv
e Pari-Passu
Security Security
Cover Cover Ratio
Ratio
i This column shall include book value of assets having exclusive charge and outstanding book value of debt for which this certificate is issued.
ii This column shall include book value of assets having exclusive charge and outstanding book value of all corresponding debt other than column C.
iii This column shall include debt for which this certificate is issued having any pari passu charge - Mention Yes, else No.
iv This column shall include a) book value of assets having pari-passu charge b) outstanding book value of debt for which this certificate is issued and c). other
debt sharing pari- passu charge along with debt for which certificate is issued.
v This column shall include book value of all other assets having pari passu charge and outstanding book value of corresponding debt.
vi This column shall include all those assets which are not charged and shall include all unsecured borrowings including subordinated debt and shall include
only those assets which are paid-for.
vii In order to match the liability amount with financials, it is necessary to eliminate the debt which has been counted more than once (included under exclusive
charge column as also under pari passu). On the assets side, there shall not be elimination as there is no overlap.
viii Assets which are considered at Market Value like Land, Building, Residential/ Commercial Real Estate to be stated at Market Value. Other assets having
charge to be stated at book value/Carrying Value.
ix The market value shall be calculated as per the total value of assets mentioned in Column O.
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Annexure II- Guidance note on list of Covenants
Category Sub-type (As applicable) Covenant (As applicable)
1. Accounts/  Debt Service Reserve amount  Covenant as to amount to be maintained,
funds/  Interest Service Reserve Account manner of creation and/or funding of
reserves  Major maintenance reserve account, Date till required to be maintained
maintained  Escrow account/RERA account or date on which to be created, manner of
 Debenture Redemption Reserve creation including period for renewal,
replenishment, invocation (amount, date,
 Debenture Reserve Fund
period,etc.), manner of maintenance (ratio,
 Recovery Expense Fund
percentage etc), bank account number (if
 Account details
applicable) etc.
 Any other Fund/Account
2. Financial  Debt Service Coverage Ratio (DSCR)  Covenant as to maintenance as a ratio or
 Interest cover percentage of …. (state), Not less than/ Not
 Net Debt to EBITDA exceeding x, Time Bucket etc.
 Gross Debt to EBITDA
 Debt cap
 Debt Equity ratio
 Debt/Tangible Net Worth
 Gross Non-Performing Assets
 PAR 90 and write off
 Net Non-Performing Assets/ Tangible Net
Worth
 Debt to Value Ratio
 CAR (Capital Adequacy Ratio) (Tier I
CAR)
 Current Ratio
 Dividend ratio (Dividend/PAT)
 Liquidity
 Asset liability mismatch
 Any other ratio (state the ratio and define
the formula)
 Payment of Interest on due dates
 Payment of principal on due dates
3. Affirmative  Security Cover as per terms of Issue  Covenant as to Ratio or percentage, not
 Title of Security/asset less than, third party interest/title, rentals,
negative lien, insurance, ROC and CERSAI
filing etc.
4. Affirmative or  Credit rating  Covenant as to minimum rating (Rating
restrictive  Credit downgrade symbol), Standalone basis, consolidated,
CE/SO rating, notch downgrade, etc.
5. Negative  Purpose/end-use  Change in Key Managerial Personnel
 Change in nature and conduct of business (KMP), Auditor, Board of Directors,
 Change in management shareholding, restriction with amount, date
 Fund raising/ borrowing/ encumbrance till which applicable, any change or
restriction with specifics, , modification of
charge/ creation of further charge,
indebtedness/further investment etc.
6. Default  Default of principal or interest or both  Covenant as to extra interest payable, cure
 Security creation default period allowed, investment allowed,
additional infusion required etc.
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