Industry

SEBI finalises draft norms for Infra Investment Trusts

Securities and Exchange Board of India’s draft guidelines for Infrastructure Investment Trusts (InvITs) will enable creation of a new investment product for arranging long-term financing for infrastructure projects. File photo

Securities and Exchange Board of India’s draft guidelines for Infrastructure Investment Trusts (InvITs) will enable creation of a new investment product for arranging long-term financing for infrastructure projects. File photo  

Taking forward a proposal made in the Union budget, the Securities and Exchange Board of India, on Thursday, came out with draft guidelines for Infrastructure Investment Trusts (InvITs), which will enable creation of a new investment product for arranging long-term financing for infrastructure projects.

These InvITs can be listed on the stock exchanges, will get tax benefits and will invest the funds collected from investors in infrastructure projects, including PPP (public private partnership).

As per the draft regulations, on which Sebi has sought public comments till July 24, the listing shall be mandatory for both publicly offered and privately placed InvITs.

“An InvIT prior to making an offer of units, either through public issue or private placement, may have strategic investors such as banks, international multilateral financial institutions, FPIs including sovereign wealth funds, which together invest not less than 5 per cent of the size of the InvIT or such amount as may be specified by Sebi,” the regulator said.

“The proposed holding of an InvIT in the underlying assets shall be not less than Rs.500 crore, and the offer size of the InvIT shall not be less then Rs.250 crore at the time of initial offer of units.

“The aggregate consolidated borrowing of the InvIT and the underlying SPVs shall never exceed 49 per cent of the value of InvIT assets. However, this may exclude any debt infused by the InvIT in the underlying SPV. “Further, for any borrowing exceeding 25 per cent of the value of InvIT assets, requirement of credit rating and unit holders approval has been made mandatory,” SEBI said.

InvITs would allow investors to invest in specific products linked to infrastructure projects, while providing necessary safeguards.

Besides, it would help the corporates raise significant amounts of capital for their projects.

According to draft papers, an InvIT which proposes to invest at least 80 per cent of the value of the assets in the completed and revenue generating infrastructure assets, would have to raise funds only through public issue of units and the minimum subscription size and trading lot for such product would be Rs.5 lakh. The remaining 20 per cent may be invested in under construction infrastructure projects.

SEBI said an InvIT, which proposes to invest more than 10 per cent of the value of their assets in under construction infrastructure projects, would require to raise funds through private placement from qualified institutional buyers and the minimum investment and trading lot for such InvITs would be of Rs.1 crore.

An InvIT would be a trust with parties such as sponsor, investment manager, trustee and project manager.

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Printable version | May 31, 2020 11:12:16 PM | https://www.thehindu.com/business/Industry/sebi-finalises-draft-norms-for-infra-investment-trusts/article6221833.ece

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