Sebi bats for relaxing InvIT norms

Market regulator Securities and Exchange Board of India (Sebi) has proposed relaxation in norms for Infrastructure Investment Trusts (InvIT) by reducing the sponsors commitment to 10 per cent of the post-issue basis, from the earlier proposed 25 per cent through a discussion paper.

“It is proposed that Regulation 12(3) of the InvIT Regulations may be amended to allow sponsors of the InvIT to hold not less than 10 per cent of the total units of the InvIT on a post-issue basis,” Sebi said.

In case of PPP projects, where acquiring or holding of the stake at special purpose vehicle (SPV) level is disallowed by government or under any provisions of the concession agreement, or any other such agreement, the consolidated value of sponsor holdings at the SPV level and the value of the units of InvIT held by the sponsor shall not be less than the value of 10 per cent of the total units of the InvIT after initial issue of units on a post-issue basis, Sebi said.

Sebi further said that all remaining conditions, as have been specified in the regulations, shall remain unchanged.

Some of the reasons given by industry for necessitating such change included concerns of tax inefficiencies, lender considerations, difficulties in exit for financial investors if investment in the holding company is not allowed, Sebi said.

Notified last year

Sebi InvIT Regulations were notified on September 26, 2014, thereby providing a regulatory framework for registration and regulation of InvITs in India.

The regulations provide for conditions for making a public offer and private placement, initial and continuous disclosures, investment conditions, unit-holder approval requirements, related party disclosures, etc.

Government of India, in the Budget for FY 2014-15 introduced a separate chapter on (InvITs) and Real Estate Investment Trusts (REITs)  in the Income Tax Act, 1961, thereby introducing various measures for Business trusts in the tax law. Further, in the Budget for FY 2015-16, the government provided clarity on certain other tax aspects such as clarity on capital gains, MAT, etc. for Business Trusts. The market regulator has sought public comments on the discussion paper by September 6, 2015.