SEBI Guidelines to determine allotment and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)

The Securities and Exchange Board of India (SEBI) recently amended the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) and SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”) vide notification dated 22 April, 2019.

With the amended regulations notified, the minimum subscription requirement has been reduced and the trading lot in terms of number of units have been defined for publicly offered InvITs and REITs. Also, limits for aggregate consolidated borrowings and deferred payments, net of cash and cash equivalents, have been increased to seventy percent of the value of the InvIT assets.

Further, the said amendments have also laid down the manner of determining the minimum allotment requirement for publicly offered InvITs and REITs. Following are the guidelines:

  1. For Initial Offer:
    1. Each allotment value shall not be less than Rs. 1,00,000/- for InvITs and Rs. 50,000/- for REITs, where such lot consists of 100 units.
    2. Allotment to any investor shall be made in the multiples of a lot.
  2. For Follow-on offer:
    1. The minimum allotment shall be of such number of lots as it had at the time of the initial offer and the value shall not be less than Rs. 1,00,000/- for InvITs and Rs. 50,000/- for REITs. Also, each lot shall consist of such number of units in its trading lot as it had at the time of the initial offer.
    2. Allotment to any investor shall be made in the multiples of a lot.

With respect to the publicly offered InvITs and REITs whose units are listed on the date of this notification i.e., 22 April, 2019, the recognized Stock Exchanges in conference with such InvITs and REITs, determine the number of units in the trading lot within 22 October, 2019.

Additional Financial Disclosure for InvITs:

As per regulation 20(3)(b) of the InvIT Regulations, the InvITs who have their aggregate consolidated borrowings and deferred payments above 49 percent shall disclose the following items additionally to financial disclosures (As stipulated by circular CIR/IMD/DF/127/2016 dated November 29, 2016):

  1. Asset cover available;
  2. debt-equity ratio;
  3. debt service coverage ratio;
  4. interest service coverage ratio;
  5. net worth;

The aforesaid amendments are aimed at providing flexibility to the issuers in terms of fundraising and increasing the access of these investment vehicles to investors.

Source: https://www.sebi.gov.in/web/?file=https://www.sebi.gov.in/sebi_data/attachdocs/apr-2019/1556017751762.pdf#page=1&zoom=auto,-16,800

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