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Sebi allows Reits, InvITs to issue debt

Sebi allows Reits, InvITs to issue debt
The Securities and Exchange Board of India (Sebi) on Monday allowed infrastructure investment trusts (InvITs) and real estate investment trusts (Reits) to raise capital by issuing debt securities.The Sebi board, at its meeting on Monday, also made several other relaxations to the InvIT and Reit framework to provide a boost to stalled infrastructure projects.

InvITs and Reits are investment vehicles that allow investors to take exposure to income-generating infrastructure and real estate. The earlier rules allowed launch of equityoriented Reits and InvITs, which offered only an indicative yield but not a fixed yield. Issue of debt-oriented Reits and Sebi has reiterated its InvITs would offer fixed returns intent to adopt a consultative to investors, which could provide approach in refining regulations a fillip to these instruments, to make these trusts successful bankers said. platforms,” said

Further, Sebi has extended Bhairav Dalal, partner, real the concept of ‘strategic estate (tax), PwC India. investor’ for Reits. It was earlier Sebi had notified the regulations only allowed for InvITs. Sebi for Reits and InvITs in also allowed single-asset Reits 2014 but fund raising through on the lines of InvITs and these instruments failed to allowed Reits to lend to the take off. So far, only two InvITs, underlying holding company IRB InvIT Fund and Indiagrid or the special purpose vehicle. Trust, are listed on the stock

“The board, after deliberations, exchanges. While several realty decided to have further players have shown interest consultation with stakeholders in launching Reits, there has on a proposal of allowing Reits not been a single issuance. to invest at least 50 per cent of The regulator has also proposed the equity share capital or interest amending the definition in the underlying holding of valuer for both types of company or the special purpose trusts. As of now, valuers vehicle. Similarly, allowing the should not be investors in holding company to invest at InvITs or the assets being valued. least 50 per cent of the equity The valuer should have a share capital or interest in the minimum experience of five underlying special purpose years in undertaking valuation vehicle,” a Sebi release said. of infrastructure assets.

“The proposal should "The changes approved by enable owners of large-value Sebi are yet another attempt assets to explore Reits. Further, to push the Reit and InvIT allowing Reits to lend to holding regime. Allowing such vehicles companies and special purpose to raise debt capital by vehicles should result in way of issuance of bonds is efficient fund flow management. unique Throughas it is not these permittedproposals, | Allowed single-asset Reits on the lines of InvITs for other Sebi-regulated fund vehicles like alternative investment funds and mutual funds. This brings the investment trust regime more on a par with the Reserve Bank of India’s regime for non-banking finance companies, which typically raise private capital by issuance of non-convertible debentures," said Tejesh Chitlangi, partner, IC Legal.

Besides, the board was apprised on action taken against 331 suspected shell companies barred from trade since August 7, said a source. So far, Sebi has asked for a forensic audit of 12 firms. While stock exchanges are looking into the credentials of 90 firms, in some cases the Securities Appellate Tribunal has stayed the trading ban. The Sebi board also reviewed cases pending before various courts and appellate tribunals. The regulator has a one-year timeline to conclude cases more than a year old. Sebi Chairman Ajay Tyagi has strengthened the enforcement department but it is finding it difficult to meet the deadline. Sebi has also appointed a chief economic adviser to assist on policy issues.
Made several relaxations to the InvIT and Reit framework to provide a boost to stalled projects

Extended the concept of ‘strategic investor’ for Reits. It was earlier only allowed for InvITs

Allowed Reits to lend to the underlying holding company or the special purpose vehicle

Allowed single-asset Reits on the lines of invITS

The Business Standard , New Delhi,19th september 2017


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