The capital markets watchdog Securities and Exchange Board of India (SEBI) has decided to revamp the Infrastructure Investment Trusts (InvITs) regulations after receiving recommendations from the industry.
SEBI has floated a consultation paper proposing amendments to InvITs regulations. It has also proposed to allow InvITs, an investment product for raising long-term capital for infrastructure projects, to invest in two-level special purpose vehicles (SPVs).
This will remove the restriction on SPVs to invest in other SPVs, thus allowing InvITs to invest in a holding company which subsequently holds stake in SPVs. Currently, InvITs own a majority holding in SPVs that do not invest in other SPVs.
Besides, SEBI has proposed reducing the mandatory sponsor holding in InvITs to 10% of the total units of such units on a post-issue basis for three years, from 25% currently.
SEBI had issued norms for floating InvITs and real estate investment trusts (REITs) in September 2014 after fine-tuning the draft norms in July 2014 to help cash-crunched infrastructure and realty firms to unlock capital while creating a new investment avenue for institutions and wealthy individuals.
However, InvITs have failed to get desired attention as only four applications have been received till now for setting up these Trusts. Of these, two applications have already been approved by SEBI.
Now, the regulator has decided to revamp InvITs regulations after receiving recommendations from the industry.
SEBI said 25% sponsor commitment as per current norms may limit monetisation for sponsors and reduce release of capital. It added that it may lead to sponsor putting money, out of its own pocket, in the InvIT so as to maintain the required 25% stake.
The regulator also proposed to increase the number of sponsors to five, from the current requirement of three.
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