The Securities and Exchange Board of India (SEBI) has issued key amendments to the Master Circular for Infrastructure Investment Trusts (InvITs), aimed at improving regulatory clarity and easing operational procedures for sponsors and listed InvITs. The circular, effective immediately, brings two major changes: (1) a revision of the lock-in provisions for units issued through preferential allotment, and (2) the introduction of a structured framework for follow-on offers (FOOs) by InvITs.
1. Revised Lock-In Provisions for Preferential Issue of Units
Previously, sponsors and sponsor group entities participating in preferential allotments were subject to a lock-in requirement of 25% of units for 3 years, and the remaining units for 1 year. This was not fully aligned with SEBI’s primary InvIT regulations, which only require a 15% minimum unitholding (or 25% in specific cases) for 3 years post-listing.
To address this mismatch, SEBI has updated the lock-in rules:
- If the sponsor (or its associate) continues as the project manager for at least 3 years post-trading approval:
- Only 15% of the allotted units will be locked-in for 3 years.
- The remaining units will be locked-in for 1 year.
- If the sponsor is not the project manager:
- 25% of the units will be locked in for 3 years.
- The balance remains locked-in for 1 year.
In all scenarios, the minimum unitholding requirement under Regulations 12(3) or 12(3A) must be maintained.
2. Inter-se Transfer of Locked-In Units Now Permitted
For the first time, SEBI has allowed transfer of locked-in units among sponsor group entities, with the condition that the lock-in continues for the transferee. Transfers are only allowed within the same sponsor group (not across different sponsors). If there is a change in sponsor, or conversion to a self-sponsored manager, locked-in units may be transferred to the incoming sponsor or self-sponsored manager/shareholders—again subject to compliance with minimum holding norms.
3. Introduction of Follow-On Offer (FOO) Guidelines
To streamline the capital-raising process, SEBI has inserted a dedicated framework for Follow-On Offers by publicly listed InvITs:
- FOOs will follow public issue rules, including in-principle approval from exchanges, mandatory demat issuance, and adherence to timelines.
- Minimum public unitholding must be 25% post-issue.
- Use of proceeds for general purposes must follow prescribed limits.
- No further capital raising (except under employee schemes) is allowed until listing is completed.
- Certain disclosure requirements are exempted, including projections and combined financials.
Merchant bankers must submit due diligence certificates along with the draft offer documents.
Conclusion
These amendments aim to align regulatory expectations with market practices, reduce procedural friction, and enable more efficient and transparent capital raising for infrastructure trusts. By providing flexibility for sponsors and structure for follow-on fundraising, SEBI continues to promote a robust and investor-friendly InvIT ecosystem.
