SEBI adds a visual credit risk disclosure for listed debt
SEBI has prescribed a colour-coded Credit Risk-o-Meter for listed and proposed-to-be-listed non-convertible securities, commercial paper, securitised debt instruments, security receipts and structured or market-linked debt. It applies to public issues and private placements and must appear in specified offer documents, advertisements and online bond platform displays.
The meter translates credit ratings into six risk levels. Where several agencies rate an instrument, it must reflect the lowest rating. Disclosures must identify the rating agency and actual rating, and unsecured instruments must be clearly labelled. An issuer’s non-cooperation with the rating agency must also be reflected. The meter addresses credit risk; the prescribed disclosures separately recognise market and liquidity risks.
For boards of debt issuers, implementation requires coordination between treasury, legal, investor relations and distribution partners. Offer documents and promotional material should remain consistent with rating information, including adverse changes, so that investors receive the same risk description across channels.
