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SEBI finalises draft norms for Infra Investment Trusts

InvITs are proposed to provide a suitable structure for financing/refinancing of infrastructure projects in the country

July 18, 2014 11:12 IST | India Infoline News Service
The Securities and Exchange Board of India (SEBI) has put out draft regulations for so-called infrastructure investment trusts to provide easier financing options to developers of public works.

InvITs are proposed to provide a suitable structure for financing/refinancing of infrastructure projects in the country, SEBI said in a notification on Thursday.

InVITs shall invest in infrastructure projects, either directly or through SPV. In case of PPP projects, such investments shall only be through SPV.

An InvIT which proposes to invest atleast 80% of the value of the assets in the completed and revenue generating Infrastructure assets, shall raise funds only through public issue of units and minimum subscription size and trading lot for such InvIT shall be Rs five lakhs. Rest 20% may be invested in under construction infrastructure projects (subject to maximum of 10%) and other permissible investments.

An InvIT which proposes to invest more than 10% of the value of their assets in under construction infrastructure projects shall necessarily raise funds through private placement from Qualified Institutional Buyers and body corporate and the minimum investment and trading lot for such InvITs shall be of Rs. 1 crore. Such InvITs shall mandatorily invest in not less than one completed and revenue generating project and not less than one pre-COD project.

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, etc., which together invest not less than 5% of the size of the InvIT or such amount as may be specified by the Board.

An InvIT shall be a trust with parties such as Sponsor(s), Investment Manager, Trustee and Project Manager(s).

A trustee of InvIT can either be:
a. a Debenture Trustee registered with SEBI and not an associate of the sponsor(s)/investment manager; or
b. an associate of the sponsor/investment manager having not less than 50% of its directors as independent and not related parties to the InvIT;
However, a trustee of InvIT cannot be trustee to another InvIT or an Alternative Investment Fund engaged in infrastructure sector.

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% 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% of the value of InvIT assets, requirement of credit rating and unit holders approval has been made mandatory.

Feedback is invited by July 24, 2014 on draft regulations.






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