Sebi puts in place framework for conversion of private listed infrastructure investment trusts

Capital markets regulator Sebi on Wednesday came out with a framework for conversion of a private listed Infrastructure Investment Trust (InvIT) into a public InvIT.

In addition, the regulator has issued guidelines for converting a private unlisted InvIT into a private listed one.

In a circular, Sebi said a private listed InvIT may convert into a public InvIT on making a public issue of units through a fresh issue and/or an offer for sale.

A listed private InvIT has to comply with various requirements, including having at least 5 investors other than the sponsor(s), its related parties and its associates.

Post issuance and listing of such units, the private listed InvIT will stand transformed and will be considered a public InvIT. Such an entity will be required to comply with all provisions of the InvIT rules prescribed for public InvITs.

With regard to conditions for conversion, Sebi said a private listed InvIT will have to fulfill certain conditions, including obtaining approval from 75 per cent of the unit holders by value for such public issue of units.

In addition, a private listed InvIT need to be compliant with all the applicable listing obligations and disclosure requirements since the date of its listing or preceding three years, whichever is less.

However, the imposition of only monetary fines by stock exchanges on it or its investment manager will not be a ground for ineligibility for issuance.

Among others, a private listed InvIT should not have defaulted in making any distribution since listing from the date of its listing or preceding three years, whichever is less.

Also, Sebi said that minimum sponsor(s) contribution for the public issue of units will be either to the extent of 15 per cent of the units issued through the public issue or 15 per cent of the post-issue capital.

Further, units offered towards minimum sponsor(s) contribution will be locked-in for 18 months from the date of listing of units allotted in such a public issue.

However, if any units are already locked-in and the remaining lock-in period is more than 18 months, the units will continue to be locked-in for such remaining period.

With regards to restrictions on transferability of units, Sebi said units held by the sponsor(s) in excess of minimum sponsor(s) contribution will be locked-in for a period of one year from the date of listing of units allotted in the public issue.

"Units held prior to the issue, by persons other than the sponsor(s), shall be locked in for a period one year from the date of listing of units allotted in the public issue," Sebi said.

Maximum subscription from any investor other than sponsor(s), its related parties and its associates, in initial offer will not be more than 25 per cent of the total unit capital on post-issue basis, as per Sebi.

In respect of disclosures in the draft offer document, Sebi said an InVIT will disclose details of distributions made by it and comparison of actual performance vis-à-vis the projections made in the placement memorandum at the time of initial offer.

In a separate circular, the regulator said that a private unlisted InvIT may list its units and convert into a private listed InvIT on making a private placement of units through a fresh issue and/or an offer for sale.

After the issuance and listing of such units through private placement, the private unlisted InvIT will be considered a private listed InvIT and it will be required to comply with the rules prescribed for private listed InvITs.

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