Informal Guidance: SEBI Clarifies Position on Mandatory Listing of NCDs under Regulation 62A and the Meaning of “Related” for Independent Director Eligibility

The Securities and Exchange Board of India (SEBI) has recently issued informal guidance notes providing important clarifications on two distinct provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), which are discussed below:

1. Mandatory Listing of NCDs Acquired Pursuant to Corporate Restructuring: Informal Guidance to Ananya Finance for Inclusive Growth Private Limited 

SEBI, in an informal guidance letter dated July 20, 2026 (Guidance 1, which can be viewed by clicking on this link), issued to Ananya Finance for Inclusive Growth Private Limited (Ananya), a debt listed entity, clarified the applicability of Regulation 62A of the LODR Regulations to unlisted non-convertible debentures (NCDs) acquired pursuant to a business transfer arrangement.

Background: Prayas Financial Services Private Limited (Prayas), a wholly-owned subsidiary of Ananya, entered into a Business Transfer Agreement (BTA) dated February 28, 2026 pursuant to which certain assets and liabilities, including unlisted unsecured NCDs originally issued by Prayas on July 4, 2024 (bearing ISIN INE0M5P08016) to Gojo and Company Inc. and maturing on July 12, 2027, were transferred to Ananya. No fresh debenture certificates were issued by Ananya and no new ISINs were allotted, with the existing ISIN continuing in the name of Prayas. In this backdrop, Ananya sought SEBI’s guidance on whether the transfer of such unlisted NCDs attracted the mandatory listing requirement under Regulation 62A, or whether the transaction should merely be regarded as a transfer rather than a fresh issuance. Ananya also sought clarification regarding the applicable listing process, if Regulation 62A were to apply. 

SEBI’s Clarification: SEBI noted that Regulation 62A(1) requires every debt listed entity to list all non-convertible debt securities proposed to be issued on or after January 1, 2024. SEBI clarified that the applicability of Regulation 62A cannot be determined solely on the basis of the legal structure adopted for the transaction. Where a debt listed entity assumes and continues the obligations in respect of outstanding unlisted NCDs issued on or after January 1, 2024, the requirements of Regulation 62A must be complied with holistically. SEBI further noted that the operational aspects relating to ISINs, depository records and listing formalities are administered by the stock exchanges and depositories, and accordingly, the applicant must ensure compliance with the applicable operational requirements. 

Takeaway: This Guidance 1 reinforces that the applicability of Regulation 62A is to be determined on the basis of the substance of the transaction rather than its legal form. Accordingly, where a debt listed entity assumes and continues obligations relating to outstanding unlisted NCDs issued on or after January 1, 2024 through a corporate restructuring mechanism such as a BTA, the requirements of Regulation 62A must be complied with holistically, and such entity would be required to list the assumed NCDs.

2. Meaning of “Related” for Independent Director Eligibility: Informal Guidance to Maithan Alloys Limited 

SEBI, in an informal guidance letter dated March 2, 2026 (Guidance 2, which can be viewed by clicking on this link), issued to Maithan Alloys Limited (Maithan), clarified the scope of the term ‘related’ under Regulation 16(1)(b)(iii) of the LODR Regulations for determining the eligibility of an Independent Director.

Background: The promoter of Maithan is Mr. Subhas Chandra Agarwalla, who also serves as its Chairman and Managing Director. Mr. Siddhartha Shankar Agarwalla, being the son of the cousin of Mr. Subhas, is the Vice President of Maithan, forms part of the Promoter Group, holds an aggregate shareholding of 18.07% together with his wife, Mrs. Sonam Agarwalla, and is also a director in two subsidiaries of Maithan. Maithan proposed to appoint the cousin of Mr. Siddhartha (being the daughter of his father’s sister) as an Independent Director. In this backdrop, Maithan sought SEBI’s guidance on whether a cousin of a director or a member of the Promoter Group would be regarded as ‘related’ to director or member of Promoter Group under Regulation 16(1)(b)(iii) of the LODR Regulations. 

SEBI’s Clarification: SEBI noted that Regulation 16(1)(b)(iii) requires an Independent Director to not be ‘related to promoters or directors’ of the listed entity. SEBI further observed that the term ‘cousin’ is not included within the definition of ‘relative’ under Rule 4 of the Companies (Specification of Definitions Details) Rules, 2014 read with Section 2(77) of the Companies Act, 2013 and Regulation 2(1)(zd) of the LODR Regulations. Accordingly, based on the facts presented, the cousin of Mr. Siddhartha (the proposed appointee) may be eligible for appointment as an Independent Director. However, SEBI clarified that the listed entity must continue to ensure compliance with all other eligibility conditions prescribed under Regulation 16(1)(b), including the shareholding limits under Regulation 16(1)(b)(iv).

Takeaway: This Guidance 2 clarifies that the expression ‘related’ under Regulation 16(1)(b)(iii) is confined to the statutory definition of ‘relative’ under the LODR Regulations read with the Companies Act, 2013. Consequently, a ‘cousin’ does not fall within the scope of the said provision.