The unlisted bond distribution market is likely to come under scrutiny of the Securities and Exchange Board of India in the wake of the crisis at all-electric cab hailing startup BluSmart Mobility, said industry insiders.
BluSmart sold more than ₹100 crore of unlisted, unsecured corporate bonds to high-net-worth individuals as well as some retail investors in the past one year, mostly facilitated by fintech platforms like Yubi, Centricity and Klub. Sebi is not in favour of allowing retail investors to have exposure to such products which are typically high risk. The markets regulator in November 2024 had asked AltGraaf, Tap Invest and Stable Investments to stop selling any unlisted bonds and NCDs (non-convertible debentures) on their platforms.
Industry executives said the regulator may now look deeper into these products and how they are sold to figure out if there are mis-selling. The regulatory action could vary from fresh guidelines for everyone to follow to imposing major fines on these platforms, they said.
“This BluSmart incident will have a larger impact on the bond distribution industry because Sebi is against wide distribution of unlisted bonds. I think they will take more strict action against platforms selling such products,” said the founder of an online bond distribution platform.
Sebi issued OBPP (Online Bond Platform Provider) regulations in November 2022 to regulate startups selling fixed income instruments like corporate bonds to retail investors.
Wint Wealth, Aspero, Jiraaf and Grip Invest are some of the regulated OBPPs in the country. They typically sell listed bonds which offer a rate of interest higher than fixed deposits, in the range of 9% to 13%, depending on the size of the issue and the company issuing. Industry estimates suggest that the regulated space operates on a monthly volume of around ₹500 crore. These firms are prohibited from dealing in unlisted securities. But beyond these regulated platforms, there are many online entities which sell unlisted stocks as well as unlisted bonds.
“Scrutiny is bound to go up; the regulator will seek details around which platform is selling what, are platforms selling unlisted bonds through offline channels,” said another founder of an online bond distribution platform.
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