Revised pricing methodology for institutional placements of privately placed InvITs
The Securities and Exchange Board of India ("SEBI"), vide circular dated February 8, 2024, modified the pricing for institutional placement by privately placed InvITs. Pursuant to this, privately placed InvITs can undertake institutional placement based on the Net Asset Value ("NAV") of the assets of InvIT, subject to, inter alia, the following conditions:
- the institutional placement by public InvIT is required to be made at a price not less than the average of the weekly high and low of the closing prices of the units of the same class quoted on the stock exchange during the 2 (two) weeks preceding the relevant date; and
- the institutional placement by privately placed InvIT is required to be made at a price not less than the NAV per unit, based on the full valuation of all existing InvIT assets conducted in terms of the SEBI (InvITs) Regulations, 2014 ("SEBI (InvITs) Regulations, 2014").
Key amendments to the SEBI (REITs) Regulations, 2014
SEBI, vide notification dated March 8, 2024, amended the principal regulations to introduce the regulatory framework for facilitation of Small and Medium REITs ("SM REITs"). The amendment has introduced a framework for SM REITS and primarily prescribes the registration requirement, eligibility criteria, investment conditions and other requirements for SM REITs. Further, the definition of 'REIT' is substituted to mean 'a person that pools INR 50 crore (Indian Rupees fifty crore) or more for the purpose of issuing units to at least 200 (two hundred) investors so as to acquire and manage real estate asset(s) or property(ies), that would entitle such investors to receive the income generated therefrom without giving them the day-to-day control over the management and operation of such real estate asset(s) or property(ies)'.
It is clarified that the new definition of 'REIT' includes SM REITs and that any company which acquires and manages real estate asset(s) or property(ies) and offers or issues securities to the investors, is not construed as a REIT.
Key amendments to the SEBI (InvIT) Regulations, 2014
SEBI, vide notification dated May 27, 2024, amended the principal regulations to introduce a framework for issuance of subordinate units. Some of the key provisions are as follows:
- subordinate units can only be issued by a privately placed InvIT upon acquisition of an infrastructure project, to the sponsor, its associates and the sponsor group and it is deemed to be part of the consideration for acquisition of the infrastructure project;
- the units cannot carry any voting rights or distribution rights and are required to be issued in a dematerialised form with an international securities identification number; and
- the investment manager is responsible for monitoring the progress related to achievement of performance benchmark and is required to report it annually (or such other prescribed frequency), after certification by the statutory auditor of the InvIT and approval of the trustee and the audit committee of the investment manager.
Further, for calculating the minimum unitholding requirements, subordinate units are not considered in computing total outstanding units of the InvIT. Per the eligibility criteria for granting certificate to a trust, there can be only 1 (one) class of units and all units are required to carry equal voting rights and distribution rights associated with such units.
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