Sebi proposes relaxed InvIT rules to attract investors

With Infrastructure Investment Trusts (InvITs) failing to catch sufficient attention, markets watchdog Sebi today proposed relaxation in norms including by reducing the mandatory sponsor holding to hold 10 per cent.
At a meeting here today, the Sebi board also approved a proposal for allowing InvITs to invest in two-level SPV (special purpose vehicle).
The new proposals would form part of a consultation process and the final norms would be put in place after taking into account the suggestions from all the stakeholders.
The Securities and Exchange Board of India (Sebi), in 2014, had introduced InvITs -- an investment vehicle which would enable promoters to monetise completed assets -- to make it easier to raise funds for infrastructure projects.

However, InvITs have failed to garner due attention from business houses in the country. At an event earlier in the day, Sebi Chairman U K Sinha said the regulator has so far received four applications for setting up InvITs, out of which it has already cleared two proposals.
"For smoothening the process of registration of InvIT with Sebi and launching of the offer, Sebi board has approved for bringing out a consultation paper proposing certain changes/providing clarification in the InvIT Regulations," the regulator said.

Under the proposal, Sebi may allow InvITs to invest in two-level SPV (special purpose vehicle).
The regulator plans to remove the restriction on the SPV to invest in other SPVs, thus allowing InvIT to invest in a holding company which subsequently holds stake in SPVs.

Currently, InvIT holds a controlling stake in SPVs that do not invest in other SPVs.
Besides, Sebi has proposed reducing the mandatory sponsor holding in InvIT to 10 per cent of the total units of such units on a post-issue basis for a period of three years, from the current requirement of 25 per cent.
The current requirement may limit monetisation for sponsors and reduce release of capital for them. Further, in certain circumstances, it may lead to sponsors putting money out of their own pocket in the InvIT to maintain the required 25 per cent stake.
The regulator also plans to increase the number of sponsors to five, from the current requirement of three.

Besides, the regulator has proposed other operational requirements, such as, aligning regulations in line with the provisions of Companies Act, 2013 and SCRR (Securities Contract (Regulation) Rules) filing of project implementation agreement at the time of filing of offer document, etc.