The capital markets regulator Securities and Exchange Board of India has proposed to relax norms for Infrastructure Investment Trusts (InvITs), an investment product for raising long-term capital for infrastructure projects, by lowering sponsors’ mandatory holding to 10 per cent against 25 per cent proposed earlier.
The move comes after infrastructure companies raised concerns related to tax inefficiencies, lender considerations and difficulties in exit for financial investors.
SEBI had issued norms for floating InvITs and real estate investment trusts (REITs) last September 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.
At present, InvITs can hold infrastructure assets either directly or through a special purpose vehicle (SPV), in which such a trust holds control. SEBI has proposed to allow InvITs to invest in a holding company which would further invest in other SPVs.
In the other words, the sponsors may float separate holding companies which hold multiple SPVs that have projects of a particular category. This is to take care of operating concerns for infrastructure firms.
While explaining the relaxation on sponsor commitment on a post-issue basis, SEBI said 25 per cent sponsor commitment may limit monetisation and reduce release of capital. Further, 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 per cent stake. This would be very onerous at the part of the sponsor.”
The capital markets regulator has now sought public comments till September 6 and is expected to take a final call after looking into the feedback from all stakeholders.