Procedure for notification of zero coupon bond

Procedure for notification of zero coupon bond.

7. (1) An application by an entity, being an infrastructure capital company or infrastructure capital fund or infrastructure debt fund or a public sector company under section 2(112), for notification of any zero coupon bond proposed to be issued by it shall be made in Form No. 2 at least three months before the date of issue of such bond.

(2) An application made under sub-rule (1) shall not be made for notification of a bond which is to be issued beyond a period of two financial years following the financial year in which such application is made.

(3) An application made under sub-rule (1) shall be disposed of within a period of six months from the end of the month in which such application was received.

(4) Every application, under sub-rule (1), shall be accompanied by the following documents:—

(a) where the application is made by any infrastructure capital company or infrastructure debt fund or a public sector company, being a Government company defined under section 2(45) of the Companies Act, 2013 (18 of 2013), a copy of certificate of incorporation under the said Act;

(b) where the application is made by any infrastructure capital fund, a copy of the trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908); and

(c) where the application is made by a public sector company, being any corporation, established by or under any Central Act or State Act or Provincial Act, a copy of the relevant Act.

(5) The Central Government, while specifying a zero coupon bond, by notification, shall satisfy itself that the following conditions are fulfilled:—

(a) the period of life of the bond is not less than ten years and not more than twenty years;

(b) the entity proposing to issue a zero coupon bond has an investment grade rating from at least two credit rating agencies registered under section 12(1A) of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(c) necessary arrangement has been made by the said entity for listing the zero coupon bond in a recognised stock exchange in India;

(d) the entity shall furnish an undertaking along with the application that the money realised on issue of the zero coupon bond shall be invested by it in the following manner:—

(i) 25% or more of such realisation before the end of the financial year immediately following the financial year in which the bond is issued;

(ii) the balance of such realisation within a period of four financial years immediately following the financial year in which the bond is issued; and

(e) where the application is made by an infrastructure debt fund, such fund shall along with the application, submit an undertaking that a sinking fund shall be maintained for the interest which will accrue on all the zero coupon bonds subscribed and such interest shall be invested in Government security as defined under section 2(f) of the Government Securities Act, 2006 (38 of 2006).

(6) The Central Government, after having satisfied itself about fulfilling of the conditions referred to in this rule, shall specify the bond, by notification, giving therein, inter alia , the following particulars:—

(a) name of the bond;

(b) period of life of the bond;

(c) the time schedule of the issue of the bond;

(d) the amount to be paid on maturity or redemption of the bond;

(e) the discount; and

(f) the number of bonds to be issued.

(7) The Central Government may, if the applicant fails to fulfil the conditions referred to in this rule, reject the application for notification after giving a reasonable opportunity of being heard.

(8) Every entity shall submit within two months from the end of each financial year referred to in sub-rule (5)(d), a certificate from an accountant as defined in section 515(3)(b), specifying the amount invested in each year in Form No. 3.

(9) The Central Government shall have the power to withdraw the notification, if the applicant fails to fulfil any of the conditions referred to in this rule.

(10) For the purposes of this rule,—

(i) "discount" and "period of life of the bond" shall have the meanings respectively assigned to them in section 32(d)(i) and (ii); and

(ii) "infrastructure debt fund" shall mean the infrastructure debt fund as may be notified by the Central Government under Schedule VII [Table: Sl. No. 46].