Sebi permits privately placed InvITs to issue subordinate units
Sebi permits privately placed InvITs to issue subordinate units
ECONOMY & POLICY

Sebi permits privately placed InvITs to issue subordinate units

The Securities and Exchange Board of India (Sebi) has approved a framework for the issuance of subordinate units by privately placed infrastructure investment trusts (InvITs). This move aims to address valuation gaps that may arise during the acquisition of infrastructure projects by InvITs, bridging the disparity in asset valuation between the sponsor and the InvIT. Additionally, the framework incorporates risk mitigation measures for these units.

Under the revised framework, subordinate units will be issued by privately placed InvITs exclusively upon acquiring an infrastructure project. Sebi's notification specifies that if any subordinate units are issued and outstanding, the InvIT cannot raise funds through public issues. This amendment to the InvIT rules ensures compliance with the new provisions.

InvITs, although a relatively new concept in the Indian market, have gained popularity globally for their potential for attractive returns and capital appreciation. They typically comprise a portfolio of infrastructure assets such as highways.

According to Sebi's guidelines, subordinate units will be offered solely to the sponsor, its associates, and the sponsor group as part of the consideration for acquiring the infrastructure project. These units will not confer voting or distribution rights and must be issued in dematerialised form with a distinct International Securities Identification Number.

Following issuance, subordinate units will be reclassified into ordinary units and listed on a recognised stock exchange. Sebi stipulates that the total number of outstanding subordinate units issued by an InvIT should not exceed 10% of the total number of outstanding ordinary units. However, an InvIT exceeding this limit can issue additional subordinate units while adhering to this restriction.

Furthermore, Sebi mandates a minimum three-year period between the issuance of subordinate units and their reclassification into ordinary units. Additionally, the investment manager is required to disclose progress related to performance benchmarks in the InvIT's annual report.

Sebi's framework aims to enhance transparency, governance, and risk management within the InvIT sector, fostering investor confidence in infrastructure investments.

(ET Infra)

The Securities and Exchange Board of India (Sebi) has approved a framework for the issuance of subordinate units by privately placed infrastructure investment trusts (InvITs). This move aims to address valuation gaps that may arise during the acquisition of infrastructure projects by InvITs, bridging the disparity in asset valuation between the sponsor and the InvIT. Additionally, the framework incorporates risk mitigation measures for these units. Under the revised framework, subordinate units will be issued by privately placed InvITs exclusively upon acquiring an infrastructure project. Sebi's notification specifies that if any subordinate units are issued and outstanding, the InvIT cannot raise funds through public issues. This amendment to the InvIT rules ensures compliance with the new provisions. InvITs, although a relatively new concept in the Indian market, have gained popularity globally for their potential for attractive returns and capital appreciation. They typically comprise a portfolio of infrastructure assets such as highways. According to Sebi's guidelines, subordinate units will be offered solely to the sponsor, its associates, and the sponsor group as part of the consideration for acquiring the infrastructure project. These units will not confer voting or distribution rights and must be issued in dematerialised form with a distinct International Securities Identification Number. Following issuance, subordinate units will be reclassified into ordinary units and listed on a recognised stock exchange. Sebi stipulates that the total number of outstanding subordinate units issued by an InvIT should not exceed 10% of the total number of outstanding ordinary units. However, an InvIT exceeding this limit can issue additional subordinate units while adhering to this restriction. Furthermore, Sebi mandates a minimum three-year period between the issuance of subordinate units and their reclassification into ordinary units. Additionally, the investment manager is required to disclose progress related to performance benchmarks in the InvIT's annual report. Sebi's framework aims to enhance transparency, governance, and risk management within the InvIT sector, fostering investor confidence in infrastructure investments. (ET Infra)

Next Story
Infrastructure Urban

Global Rare Earth Supply Chains Diversify Away from China

In response to the rising global demand for rare earths critical for producing everything from electric vehicles to wind turbines, supply chains are undergoing a significant realignment away from China. Historically dominant in rare earth production, China's recent policies and geopolitical tensions have prompted Western nations and other stakeholders to seek alternative sources and bolster local capabilities. Rare earth processing involves two essential stages: initial extraction and subsequent refining into individual oxide compounds used to manufacture magnets essential in various industri..

Next Story
Infrastructure Urban

Coal India, US Firm to Explore Argentine Lithium

State-run Coal India Ltd is collaborating with a US company to explore lithium blocks in Argentina, a critical step in securing supplies of the essential battery material, according to an Indian source with direct knowledge of the matter. This initiative is part of India's participation in the US-led Minerals Security Partnership (MSP), which New Delhi joined last year to ensure a steady supply of minerals necessary to meet its zero-carbon objectives. As part of the MSP, India was invited to engage in 20-25 critical minerals projects, with four already identified by the Indian government. Indi..

Next Story
Infrastructure Energy

India's Coal Consumption Set to Surge Amid Hydroelectricity Shortfall

Amid a significant drop in hydroelectricity production caused by inadequate rainfall, India is gearing up to increase its coal consumption to satisfy rising power demands, according to S&P Global Commodity Insights. This shortfall in hydroelectric power is anticipated to perpetuate India's reliance on coal imports. During the fiscal year 2023-24, India's coal production approached the 1 billion metric ton milestone, reflecting the government's strategy to lessen dependency on imported coal. Nonetheless, the country has already imported approximately 85 million metric tons of thermal coal in 20..

Hi There!

"Now get regular updates from CW Magazine on WhatsApp!

Join the CW WhatsApp channel for the latest news, industry events, expert insights, and project updates from the construction and infrastructure industry.

Click the link below to join"

+91 81086 03000

Join us Telegram