SEBI issues guidelines on preferential issue, institutional placement of units by listed REITs/InvITs

29 Sep 2022 , 09:07 AM

The capital markets regulator SEBI has published guidelines on Wednesday for preferential issuance and institutional placement of units by REIT and InvIT, two new types of investment vehicles.

In accordance with two different circulars, the regulator has laid down the procedure for the issuing of units under preferential issue as well as institutional placement by listed real estate investment trusts (REIT) and infrastructure investment trusts (InvIT).

No allotment will be provided to any institutional investor who is a sponsor, manager, or a person associated with, linked to, or a related party of the sponsor or the manager with relation to the issue of units under institutional placement, according to SEBI.

However, in institutional placements where at least 90% of the issue size has been subscribed, the issue’s object is the acquisition of assets from that sponsor, and unit holders’ approval has been obtained for the unsubscribed portion being allotted to sponsor, units may be distributed to the sponsor for the unsubscribed portion.

If units of the same class that are proposed to be allocated have been listed on a stock exchange for a period of at least six months prior to the date of issuance of notice to its unit holders for convening the meeting to pass the resolution, a listed InvIT and REIT may make a preferential issue of units or institutional placement of units.

Although they are relatively new investment vehicles in the Indian context, REITs and InvITs are hugely popular in international markets.

While an InvIT consists of a portfolio of infrastructure assets, such as highways and electricity transmission facilities, a REIT consists of a portfolio of commercial real estate, the majority of which is already leased out.

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