SEBI allows Zero Coupon Debt Securities to be Issued at Reduced Face Value of ₹10,000

The Securities and Exchange Board of India (SEBI) has issued a Circular dated December 18, 2025, modifying the conditions for issuing debtsecurities at a reduced denomination. The change allows zero coupon debt securities to be issued at a lower face value of ₹10,000, a benefit that was earlier available only to interest-bearing instruments.

The circular amends provisions of the Non-Convertible Securities (NCS) Master Circular and applies to debt securities issued through private placement and proposed to be listed.

What Was the Earlier Rule

Earlier, SEBI had allowed issuers to reduce the face value of debt securities and non-convertible redeemable preference shares to ₹10,000, subject to certain conditions. One key condition was that such securities had to be interest or dividend bearing, with regular coupon or dividend payments.

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Because of this requirement, zero coupon debt securities were excluded from the reduced denomination benefit, even though they are widely used investment instruments.

What Has Changed Now

Based on feedback from market participants, SEBI has now relaxed this condition. As per the modified rule:

• Issuers can issue debt securities at a face value of ₹10,000
• The securities can be interest-bearing or zero coupon
• Zero coupon debt securities must have a fixed maturity
• The instruments should not have any structured obligations
• The issuance must be on a private placement basis

SEBI explained that zero coupon debt securities do not pay periodic interest but are issued at a discount and redeemed at face value. Investors earn returns through the difference between the issue price and the redemption value.

What Remains Unchanged

SEBI clarified that:

• All other provisions of the NCS Master Circular remain the same
• The change applies only to private placement issues
• Government bonds, securitised debt instruments, and money market instruments are not covered

Effective Date

The circular is applicable to all eligible debt securities issued on or after December 18, 2025.

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