Capital Market and Securities Laws · Issue and Listing of Non-Convertible Securities

Private Placement and Listing of Non-Convertible Securities

Updated 11 October 2026 · Fact-checked

Private placement of non-convertible securities (NCS) means offering debt securities to a select group of identified persons, not to the public. If the issuer wants them listed, it must follow SEBI's NCS regulations: issue a placement memorandum, apply to a recognised stock exchange, and use the electronic book platform where it applies.

Understand Private Placement and Listing of NCS

A company can raise debt in two ways. It can invite the public through a prospectus, or it can approach a select group of investors. The second route is private placement. Under section 42 of the Companies Act, 2013, it means an offer to a select group of persons through a private placement offer-cum-application, other than by way of public offer.

Section 42(2) fixes the limit: identified persons not exceeding fifty, or such higher number as may be prescribed, in a financial year. Qualified institutional buyers and employees under an ESOP scheme are excluded from the count. Section 42(11) adds that a private placement made in breach of this limit is deemed a public offer. Then the Companies Act, SCRA and SEBI Act all apply.

Privately placed debt can still be listed on a stock exchange. Listing gives investors liquidity and a visible price. For listed or to-be-listed NCS, SEBI regulates the issue and transfer of securities. Section 24 of the Companies Act gives SEBI this role for listed companies and those intending to list.

SEBI's NCS framework adds disclosure and process rules on top of the Companies Act. The main ones are these. The issuer circulates a placement memorandum to identified investors. It applies to the exchange for listing. Many issues are bid for on an electronic book platform (EBP) run by a recognised stock exchange. Bidding is then transparent and open to eligible participants.

Think of it as two layers. The Companies Act decides whether the offer is validly private. SEBI's rules decide how a listed debt issue is documented, bid, allotted and listed. Exam answers should cover both. For finer details such as timelines and thresholds, rely on the current SEBI NCS Regulations and circulars in your study material.

Key rules to remember

Private placement meaning: Offer or invitation to a select group of persons, other than by public offer, through a private placement offer-cum-application; Section 42, Explanation I. Public advertisement is not allowed.
Number limit: Identified persons ≤ 50 (or higher prescribed number) in a financial year, excluding QIBs and ESOP employees; Section 42(2). Breach means the issue is deemed a public offer under section 42(11).
No renunciation: Offer and application carry no right of renunciation; Proviso to section 42(3). Only the identified person can apply.
Mode of payment: Cheque, demand draft or other banking channel; not cash; Section 42(4). Money must be kept in a separate scheduled bank account under the proviso to section 42(6).
Allotment and refund timeline: Allot within 60 days of receipt of application money; else refund within 15 days after that; delay attracts 12% p.a. interest from day 60; Section 42(6).
Return of allotment: File with Registrar within 15 days of allotment; Section 42(8). Money cannot be used until allotment is made and the return is filed (section 42(4) proviso).
No public advertisement: No public advertisement or media, marketing or distribution channels to inform the public at large; Section 42(7).
Default in return of allotment: Default in filing the return within 15 days of allotment: ₹1,000 per day of default, maximum ₹25,00,000; Section 42(9). Applies only to delay in filing the return. The penalty falls on the company, its promoters and directors.
Contravention penalty: Lower of amount raised or ₹2,00,00,000; plus refund with interest within 30 days of the order; Section 42(10).
Listing steps for privately placed NCS: Placement memorandum → EBP bidding (where applicable) → allotment → listing application to exchange → trading; Under the SEBI NCS Regulations. Check exact timelines in your study material.

How to solve Private Placement and Listing of NCS questions

Use this method for any question on private placement or listing of NCS. It keeps your answer in the provision, facts, conclusion order that ICSI expects.

1Identify the issue: is it a private placement, a deemed public offer, or a listing step such as the placement memorandum or EBP?
2State the provision: cite section 42 of the Companies Act, 2013 for private placement, and the SEBI NCS framework for listing.
3List the conditions: identified persons, number limit, no renunciation, payment by banking channel, no public advertisement.
4Apply the facts: count the persons, check the dates (60 days, 15 days), check payment mode and advertising.
5Check the consequence: breach of the 42(2) number limit means a deemed public offer under section 42(11); contravention of other requirements attracts the penalty under section 42(10), and late filing of the return attracts section 42(9).
6Add the listing angle if the securities are to be listed: placement memorandum, exchange application, EBP use.
7Conclude clearly in one line: valid private placement, or deemed public offer with its effect.

Quickest way: Five-point private placement check

When to use it: Use this for short facts-based questions where you must say whether an issue is valid.

Who: identified persons only, no public invitation.
How many: up to 50 (or higher prescribed number) in a financial year, excluding QIBs and ESOP employees.
How paid: banking channel, not cash, into a separate account.
When: allot within 60 days; file the return within 15 days of allotment.
What if breached: breach of the number limit means a deemed public offer under 42(11); contravention of other requirements attracts the penalty under 42(10), and late filing of the return attracts 42(9).

Common mistakes in Private Placement and Listing of NCS

Saying a private placement can be made to any number of people.
Students forget the cap or forget that it is counted per financial year.
Fix: Write the limit as fifty or such higher number as prescribed, per financial year, excluding QIBs and ESOP employees.
Treating a breach of the number limit as just a penalty.
Students remember sections 42(9) and (10) but skip section 42(11).
Fix: State that an issue not complying with section 42(2) is deemed a public offer, and all the Companies Act, SCRA and SEBI Act provisions apply.
Mixing up the 60-day and 15-day periods.
Both periods appear in section 42 and look alike.
Fix: Remember: 60 days to allot from receipt of money; 15 days to refund after that; 15 days to file the return after allotment.
Allowing public advertisement or letting the offer be renounced.
Students think of private placement as a softer version of a public issue.
Fix: Write both prohibitions: no advertisement under section 42(7) and no right of renunciation under section 42(3) proviso.
Ignoring SEBI when the NCS will be listed.
Students answer only from the Companies Act.
Fix: Add a line on section 24 and the SEBI NCS framework: placement memorandum, exchange listing application, EBP where applicable.
Quoting exact timelines or thresholds of the SEBI NCS Regulations from memory with confidence.
Circulars change often, so numbers get mixed.
Fix: Learn the process sequence well. State a figure only if you are sure it is current in your study material.

Worked examples

Example 1

Alpha Infra Ltd, an unlisted public company, offers NCDs by private placement to 70 identified persons in a financial year. None of them are QIBs or ESOP employees. Advise whether this is a valid private placement.

Show the solution

Provision: section 42(2) of the Companies Act, 2013 allows private placement only to identified persons not exceeding fifty (or a higher prescribed number), excluding QIBs and ESOP employees, in a financial year.
Facts: the offer is to 70 persons, and none are excluded categories. So the count is 70, which is above fifty. Assume no higher number has been prescribed for this case.
Consequence: section 42(11) says a private placement not made in compliance with section 42(2) is deemed a public offer.
The Companies Act, SCRA and SEBI Act then apply as for a public offer.

Answer: The issue is not a valid private placement. Because the count exceeds the limit, it is deemed a public offer under section 42(11), and the full public offer provisions apply to Alpha Infra Ltd.

Example 2

Beta Finance Ltd privately places NCDs and receives application money on 1 March. It makes the allotment on 10 April. Explain the requirements on allotment, use of money and the return of allotment.

Show the solution

Allotment timeline: under section 42(6) the company must allot within sixty days of receiving the money. From 1 March, 60 days run to 30 April (March has 31 days, so 30 days to 31 March and 30 more days to 30 April). Allotment on 10 April is within time.
Use of money: under section 42(4) proviso, the company cannot use the money until allotment is made and the return of allotment is filed. Until then it must stay in a separate scheduled bank account (section 42(6) proviso).
Return of allotment: under section 42(8) the company must file it with the Registrar within fifteen days of allotment, that is by 25 April.
Default: under section 42(9), if the return is filed after 25 April, the company, its promoters and directors are liable to a penalty of ₹1,000 for each day of default, up to ₹25,00,000.
Listing: if Beta wants the NCDs listed, it follows the SEBI NCS framework, including the placement memorandum and application to the exchange.

Answer: The allotment on 10 April is valid, being within 60 days. Beta must file the return of allotment by 25 April and cannot use the money until it does so. Delay in filing the return beyond 25 April attracts a penalty of ₹1,000 per day of default, up to ₹25,00,000, on the company, its promoters and directors.

Exam tips

Write section 42 sub-sections with each rule. It shows precision and earns marks.
Always add the deemed public offer consequence when the number limit is breached.
In listing questions, present the process as a sequence: placement memorandum, EBP, allotment, listing.
Do not quote SEBI circular numbers or thresholds unless you are certain; focus on the principle.
End every answer with a one-line conclusion.

Practice questions from Issue and Listing of Non-Convertible Securities

Private Placement and Listing of NCS in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalPrivate Placement under the Companies Act, 2013

Private Placement and Listing of NCS: frequently asked questions

Can privately placed NCDs be listed on a stock exchange?

Yes. A company can list privately placed debt securities on a recognised stock exchange by following the SEBI NCS framework. This includes a placement memorandum and an application to the exchange.

What is an electronic book platform?

It is a platform run by a recognised stock exchange on which bids for debt issues are placed online. It makes the bidding and allotment process transparent. Use your study material for the exact cases where it applies.

What happens if a company offers NCDs to more than the permitted number of persons?

Under section 42(11) of the Companies Act, 2013, the issue is deemed a public offer. The provisions of the Companies Act, SCRA and SEBI Act then apply to it.

Can a company advertise a private placement?

No. Section 42(7) bars public advertisements and the use of media, marketing or distribution channels to inform the public at large about the issue.

Who regulates the issue of securities by a listed company?

Under section 24 of the Companies Act, SEBI administers issue and transfer of securities by listed companies and those intending to list, by making regulations. The Central Government handles other cases.