State government undertakings have found a way around the recent Securities and Exchange Board of India diktat barring trade in unlisted bonds.

According to merchant banking sources, Kerala Power Corporation and Andhra Pradesh Water Resources have come out with bond issues targeting provident funds.

Both these companies as well as their bond issues are unlisted. At the same time, the bond issues need not be traded as provident funds are not allowed to trade and will be keeping bonds till maturity.

On the other hand, the sources added that the central government undertakings, which often tap the market for meeting their fund requirements, are considering moving back to term lending.

The change has been a fallout of the Sebi circular stating that all bond issues aiming to be traded in the secondary market has to be listed on the NSE.

Under the present circumstances, most bond issues floated by the state and central government undertakings that are not listed on the exchanges get traded on the wholesale debt segment of the NSE as permitted category.

On the other hand, bonds issued by corporates were used to be traded as unlisted bonds.

These corporates, which virtually stopped approaching the bond market, reportedly seem to be routing their fund requirement back to credit.

These alternate finance route, according to bankers, will help corporates to meet their short-term requirement till the time listing norms are finalised and the regulators clarify the ambiguity as prevailing in the market now.

Most corporates are public undertakings, which used to frequent the bond market, without listing and rating their bond issues.

After the regulatory guidelines were issued, the bond issues in the pipeline have been stalled. This includes mostly public sector and private unlisted companies such as Jawahar Lal Nehru Port Trust , Konkan Railway, National Thermal Power Corporation, and GAIL India.

Corporates other than state and central government undertakings have in their own way represented to Sebi citing the listing and disclosure requirements as elaborate, expensive and time consuming.