Explained: Here's how investors will benefit from Sebi's decision to merge debt securities rules

In a public issue, investors apply for the issue before listing, and they are allotted units.

Whereas in a private issue, the pre-decided set of investors first apply, and then listing happens. Post listing, these investors can sell their units to others in the secondary market.

This change was much needed, and it will revolutionise and further secure the debt industry. There are many mis-sellings in the wealth industry, and the chances are higher in private issues. These changes will protect investors while allowing them to invest in more opportunities. This change is a win-win situation for both; retail investors and the NBFCs.

Retail investors get better risk-adjusted returns, and NBFCs get access to public capital.

Since the issues will take place on a public platform, Sebi can issue guidelines to prevent mis-selling.

Generally, there is a certain amount of mis-selling in the wealth management space, and Sebi regulations will prevent retail investors from taking unknown risks.

Sebi can regulate public issues as they take place on public platforms instead of issuer's platforms.

It can revoke licenses, ban, add rules, and make it convenient for investors.

Since we, as investors, will have access to all the information, we will know what assets we will be holding and the risks associated with it. Thus, helping us make a better decision.

Since private issues will have a minimum ticket size of Rs 10 lakh, it is almost impossible for a retail investor to invest such a massive amount in a single asset.

Public issues will make it easier for us as retail investors to invest as low as Rs 10,000. Since public issues have a lower ticket size, we can invest in various issues from different NBFCs.

In turn, a lower ticket size will enable you to diversify and thus decrease your overall risk.

Sebi has made various changes in the past few months in the debt market, one of them being a public and private issue. These moves will altogether help to deepen the debt market in India.

As the market deepens, retail investors may be able to withdraw their money instantly. Since there will be a lot of financial players in the market, this might be possible.

It is always said it is better to diversify your money across different assets, so the chances of you losing your money or the risk decreases.

The same aspect applies to getting capital from numerous sources. An NBFC might have access to abundant capital from HNIs, Mutual Fund Houses, or institutional investors, but it is always better to access public capital.

Because it may happen that if one of the mutual fund houses backs out from giving capital to the NBFC, other mutual fund houses may not provide them with money.

So, a diversified source of capital is always better.

Smaller NBFCs operate at maximum efficiency; also, they have lower leverage which makes it better to raise money from the public comfortably.

Current changes will not only protect investors but also open them to invest in more opportunities.

As there is a gap of education and transparency in the space of private issues. This is a great move to empower retail investors and to enable them to invest in different assets with a high bar for transparency from the NBFCs in public issues.