Sebi Issues InvIT Subsidiary Guidelines
The Securities and Exchange Board of India has announced revisions to the Infrastructure Investment Trust (InvIT) regulations, enabling privately placed InvITs to issue subordinate units. These units are exclusively available to sponsors, their associates, and the group upon acquiring an infrastructure project, capped at 10% of the acquisition price. A sponsor, in this context, is the entity establishing an InvIT. Moreover, the total number of outstanding subordinate units cannot exceed 10%.
The Board stated, “The total number of outstanding subordinate units issued by an InvIT at any point in time shall not exceed ten percent of the total number of outstanding ordinary units issued by such InvIT.” Unlike ordinary units, subordinate units do not possess voting or distribution rights. They can be reclassified as ordinary units only after their financial statements meet performance benchmarks and three years after issuance. Once reclassified, ordinary units must be listed on recognized stock exchanges following approvals.
Sebi has instructed investment managers to oversee progress towards achieving performance benchmarks and to submit annual reports. These amendments, endorsed by Sebi in its March board meeting, have been officially announced, thereby becoming effective.
