The capital markets regulator has proposed to allow pension funds and provident funds to invest in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) as strategic investors.
Strategic investors to REITs or InvITs are akin to anchor investors in initial public offerings of companies. They get an allocation before the opening of a REIT or InvIT issue, and are required to invest at least 5% of the total offer size and can invest up to 25% of the total offer size. Their units are then locked in for a period of 180 days from the date of listing.
In a consultation paper issued on Friday, the Securities and Exchange Board of India suggested widening the definition of strategic investors to include qualified institutional buyers (QIBs) as given under the SEBI (Issue of Capital and Disclosure Requirements). This would include insurance funds set up and managed by the Indian army, navy and air force, and insurance funds set up and managed by the Department of Posts, SEBI said.
The paper also suggested restricting foreign portfolio investors (FPIs), which are currently allowed to be strategic investors. Since QIBs under the listing regulations or ICDR Regulations do not include FPIs who are individuals, corporate bodies or family offices, SEBI suggested that the same approach should be followed for the definition of strategic investors.
Therefore, the definition of strategic investor which currently includes “a foreign portfolio investor” would be changed to “a foreign portfolio investor other than individuals, corporate bodies and family offices”.
On the need to revise the definition of strategic investors, SEBI said the current definition includes only a select few investors. “The definition is narrow in scope and does not include many institutional investors like public financial institutions, insurance funds, provident funds, pension funds, etc. who also make investments in units of REITs and InvITs as it aligns with their investment mandate of long-term, stable, income generating investments.”
“As a consequence, such investors (who are primarily regulated institutional investors are not eligible to apply under the Strategic Investor category in a public issue of units and the REIT/InvIT is unable to attract capital from such investors,” it added.
