NEW DELHI: Markets regulator Sebi has introduced new rules to lower the minimum allotment lot in the primary market for privately placed Infrastructure Investment Trusts (InvITs) to ₹25 lakh, bringing it in line with the secondary market trading lot size.
Previously, the minimum allotment lot for privately placed InvITs was either ₹1 crore or ₹25 crore, depending on the asset composition. Earlier reforms had already reduced the trading lot size in the secondary market to ₹25 lakh, regardless of the asset mix.
As a result, this amendment standardizes the minimum allotment size in the primary market for all privately placed InvITs to ₹25 lakh, aligning it with secondary market regulations.
Additionally, through separate notifications issued on September 1, the regulator has enhanced the ease of doing business for InvITs and Real Estate Investment Trusts (REITs) by amending existing rules.
Under the new guidelines, related parties of a REIT/InvIT, as well as those of the sponsor, investment manager, or project manager, will not be classified as “public” unless they are Qualified Institutional Buyers (QIBs). Importantly, they will always be excluded from the “public” category, regardless of their QIB status.
Previously, units held by related parties of sponsors and managers did not count towards the “public” units. This amendment now allows units held by related parties who are QIBs to be classified as public.
The regulator also mentioned that if a holding company (holdco) generates negative net distributable cash flow, it may offset this against cash flows from its underlying SPVs, provided it makes adequate disclosures to unitholders in the specified format.
Previously, a holdco was required to distribute 100% of cash flows from underlying SPVs to the REIT/InvIT. This amendment permits a holdco to adjust its negative cash flows prior to distribution.
The regulator has also synchronized submission timelines for various reports, including quarterly reports to stock exchanges, trustees, and investment managers, to align with the timelines for financial results submission.
Previously, different timelines were set for report submissions.
Furthermore, the regulator has simplified the portfolio managers’ rules to enhance the disclosure document format.
“The portfolio manager shall provide the disclosure document in the format specified by the Board, along with a certificate in Form C, prior to entering into an agreement with the client,” Sebi stated.
The disclosure document serves as an essential compendium of information, assisting investors in making well-informed decisions.
These amendments followed the approval of the proposal by Sebi’s board in June.
