Issuers raise $107M through tokenized corporate bonds in India's SEBI Demat 2.0 pilot

Three companies sold ₹1,025 crore ($107.2 million) of corporate bonds as digital tokens in the first run of Demat 2.0, India’s regulator-led pilot. 

The pilot is the first real test of issuing and settling Indian corporate debt on a shared digital ledger within the country’s current market system.

What milestone did India accomplish?

The Securities and Exchange Board of India (SEBI) has referred to India as “the first country” to launch a project like the Demat 2.0 pilot. Under this system, corporate bonds are issued, held, and settled as digital tokens on a distributed ledger that is owned by India’s two statutory depositories, NSDL and CDSL.

The cash leg of each transaction is settled in the Reserve Bank of India’s wholesale central bank digital currency, known as the e₹-W. Meanwhile, the bond and the payment are linked through the RBI’s Unified Market Interface.

SEBI disclosed the figures from the now complete first stage of the pilot on Thursday. State-owned power financier REC Ltd. went first on September 7, pulling in ₹500 crore ($52.3 million) from 18 investors.

REC’s bond offered a 7.3% coupon and pulled in bids worth ₹7.96 billion ($83.2 million)— far more than the ₹5 billion ($52.3 million) it was actually looking to raise.

Engineering group Larsen & Toubro matched the ₹500 crore figure two days later with just four investors, and non-bank lender IIFL rounded out the batch the same day with a ₹25 crore ($2.6 million) sale to a single buyer. Altogether, the three companies sold ₹1,025 crore ($107.2 million) of corporate bonds as digital tokens.

SEBI says that issuers can now get their money the same day they make bids rather than the usual two to three days later. Adding to that, smart contracts can now automatically send coupon and redemption payments into bondholders’ e₹ wallets when they fall due.

Do issuers need a Demat 2.0 account?

A 24-question FAQ published by SEBI explains that the Demat 2.0 network is private and completely run by the depositories, which hold and manage the keys for users. Investors also don’t have to open separate accounts or complete fresh Know-Your-Customer checks because the Demat 2.0 account is simply attached to an investor’s existing demat account and linked to a digital-rupee wallet opened at their own bank.

Issuers only require a CBDC wallet tied to a designated bank account to collect proceeds and make payments.

SEBI has also clarified that the tokenized bond is still a security under the Securities Contracts (Regulation) Act, 1956. The depository also remains the official record of who owns what under the Depositories Act, 1996.

SEBI explained that the ledger has no need for a separate credit rating because the issuer’s obligations and the cash flows are exactly the same.

Notably, the pilot will run in three stages under SEBI’s Regulatory Sandbox. This first stage is only for institutional issuance.

The next stage adds secondary trading, which will go through exchanges’ existing RFQ and OTC reporting systems rather than a brand new venue. A final stage would extend the network’s nodes to credit rating agencies and other regulated participants.

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