SEBI sanctions ‘ease of doing business’ procedures for InvITs and REIT
SEBI sanctions ‘ease of doing business’ procedures for InvITs and REITs
The Securities and Exchange Board of India (SEBI) has consented to take steps to enhance ‘Ease of Doing Business’ for Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).
For this, the market regulator has approved amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI (Real Estate Investment Trusts) Regulations, 2014.
Under an InvIT, a Special Purpose Vehicle (SPV) must invest at least 90 percent of its assets in infrastructure projects. After the concession agreement concludes, the infrastructure project in the SPV ceases to exist.
However, the InvIT may now have to continue to hold investment in such SPV, as an immediate sale or winding up may not be possible.
Offering additional investment options for temporary deployment of funds by InvITs and REITs and mitigating concentration risk, they will be allowed to invest in units of liquid mutual fund (MF) schemes.
Herein, the credit risk value should be at least 10 and must fall under the Class A-I or Class B-I (liquid MF schemes holding debt securities rated AA and above) in the potential risk class matrix.
SEBI further said that to align investment norms for privately listed InvITs with publicly listed InvITs in greenfield infrastructure projects, the privately listed InvITs will be permitted to invest up to 10 percent of their assets in greenfield projects. This means construction infrastructure projects as defined in the InvIT Regulations. (Currently, privately listed InvITs cannot invest in PPP greenfield infrastructure projects).
Additionally, InvITs with leverage exceeding 49 percent and up to 70 percent of the value of their assets will be allowed to avail fresh borrowings for capital expenditure, major maintenance expense for road project and refinance of existing debt.
This relates to the permitted purposes under which only the principal portion of the debt was restructured.
