Infrastructure Investment Trusts (InvIT)s like IRB welcome SEBI’s new relaxed guidelines

Securities Exchange Board of India (SEBI), the markets watchdog, introduced relaxed guidelines for infrastructure investment trusts InvIT on Friday. Now infrastructure organizations can expect to unlock a simplified structure and greater liquidity.

SEBI lowered the required sponsor holding in InvITs to 15%.  It will also let InvITs to invest in a two level special purpose vehicle (SPV) formation via holding companies. SEBI also got rid of the limit on the number of sponsors of InvIT. This will allow groups of multiple investors and developers that hold investments in infrastructure projects.

Companies and analysts believe these two transformations can simplify the holding structure. The changes will also allow companies move and free up more cash locked in completed infrastructure projects.

In the press release on Friday, SEBI also cleared that it will simplify the requirements for private placement of InvIT. Company analysts and officials say that the fine print would be vital to comprehend its full impact.

SEBI has registered three InvITs so far – IRB InvIT fund, MEP Infrastructure Investment Trust and GMR Infrastructure Investment Trust.

Virendra Mhaiskar, chairman and managing director, IRB Infrastructure Developers Ltd said, “The change in the sponsor holding limit is a welcome step, but my personal view is if they reduce it too much there is no skin left in the sponsor of the game. It is a good move for the sponsor, but not sure if the investor will be willing to come in the new product is something we do not know.”

Virendra Mhaiskar also added, two-level SPV structure will not affect IRB. That’s because most of the company’s assets are held at a single level SPV structure. In September, IRB Infrastructure filed its draft red herring prospectus (DRHP) with SEBI to list its InvIT fund.

Jayant Mhaiskar, managing director and vice president for MEP Infrastructure welcomed the transformation as well.

Jayant Mhaiskar said, “We have an in principle approval and are in the process of filing our draft red herring prospective shortly. Allowing a larger number of sponsors helps companies for assets which are not 100% held subsidiaries. The move helps companies with multiple investors in the project.”

Analysts are agreeing with company officials and saying that the proposed changes are structural and for the good.