The Securities and Exchange Board of India (“SEBI”), in the exercise of its powers under Section 11(1) of the SEBI Act, 1992, and Regulation 14(4)(b), Regulation 14(4)(I), and Regulation 33 of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”), vide Circular No. SEBI/HO/DDHS/DDHS-PoD-2/P/CIR/2025/44,[1] dated March 28, 2025, introduced key amendments pertaining to the Infrastructure Investment Trusts (“InvITs”). The amendments have been made to the Master Circular for InvITS, dated May 15, 2024 (“Master Circular”). The provisions laid hereunder shall come into effect immediately.
I. Review of Lock-In Provisions for Preferential Issue of Units for InvITs
- Existing Lock-In Requirements: Regulation 12(3) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) mandates that sponsors, and sponsor groups must hold a minimum of 15% (fifteen percent) of the total units of the InvIT for 3 (three) years from the date of listing of units in the initial offer.
- Existing Lock-In Provisions (Para 7.6.1 of the Master Circular):
- The units allotted to the sponsor(s) and its associates must be locked in for 3 (three) years from the date of trading approval.
- Units in excess of 25% (twenty five percent) of the total unit capital of the InvIT shall be subject to a 1 (one) year lock-in.
- The units held by the sponsor and locked in under Regulation 12(3) of the InvIT Regulations in the past shall not be subject to fresh lock-in.
- New Lock-In Guidelines under Para 7.6.1 of the Master Cicular:
- 15% (fifteen percent) Lock-In for Three Years: 15% (fifteen percent) of the units allotted to the sponsor(s) and sponsor group(s) shall be locked-in for 3 (three) years from the date of trading approval, provided that the project manager of the InvIT is the sponsor or an associate of the sponsor and continues in that capacity for a minimum of 3 (three) years from the date of trading approval.
- 25% (twenty five percent) Lock-In for Three Years: If the project manager condition is not met, 25% (twenty five percent) of the units allotted to the sponsor(s) and sponsor group(s) shall be locked-in for 3 (three) years from the date of trading approval.
- 1 (One) Year Lock-In for Remaining Units: The remaining units allotted to the sponsor(s) and sponsor group(s) shall be locked-in for 1 (one) year from the date of trading approval. Further, the sponsor(s) and sponsor group(s) must comply with the minimum unitholding requirements under Regulation 12(3) and Regulation 12(3A) of the InvIT Regulations at all times.
- Inter-Se Transfer of Locked-In Units (New Provision inserted as Para 7.6.5 to the Master Circular):
- Units allotted under a preferential issue to a sponsor or its sponsor group entities that are subject to lock-in may be transferred among such sponsor or sponsor group entities, provided, the lock-in on such units shall continue for the remaining period with the transferee. The transferee cannot transfer such units until the expiry of the lock-in period originally applicable to those units.
- In the event of a change in sponsor, the locked-in units held by the outgoing sponsor or its sponsor group entities may be transferred to the incoming sponsor or its sponsor group entities, provided the incoming sponsor or group continues to comply with the minimum unitholding requirements as specified under the InvIT Regulations.
- In the event of conversion to a self-sponsored investment manager, the locked-in units held by the outgoing sponsor or its sponsor group entities may be transferred to the self-sponsored investment manager or its shareholders/group entities, subject to compliance with minimum unitholding requirements.
II. Guidelines for Follow-On Offer by Publicly Offered InvITs
- Regulatory Framework for Follow-On Offer: Regulation 14(4)(b) of the InvIT Regulations currently permits a follow-on offer for raising funds after the Initial Public Offer (“IPO”) of units. A follow-on offer is defined as an offer of units of an InvIT to the public for subscription, including an offer for sale of InvIT units by existing unit holders.
- New Provisions for Follow-On Offer (Inserted in Chapter 2 (two) in the Master Circular):
- Provisions for Public Issue Apply to Follow-On Offers: The provisions in Chapter 2 (two) of the Master Circular applicable to public issues of InvIT units shall also be applicable to follow-on offers by an InvIT.
- Application to Stock Exchanges: The InvIT must apply to all stock exchanges where its units are listed, seeking in-principle approval for listing the units and designate one stock exchange as the designated stock exchange.
- Units to be Issued in Dematerialized Form: Units issued in a follow-on offer must be in dematerialized form.
- Merchant Banker and Investment Manager Responsibilities: The investment manager and merchant banker(s) shall be responsible for obtaining in-principle approval and final listing and trading approvals from the stock exchanges.
- General Purpose Funds and Minimum Public Unitholding: The amount for general purposes, as mentioned in the objects of the issue in the follow-on offer document, must align with the relevant clause of Regulation 14(4) of the InvIT Regulations. The InvIT must ensure that at least 25% (twenty five percent) of the total outstanding units are held publicly after the issue. Further, Regulation 15 of the InvIT Regulations shall be applicable for follow-on offer document and advertisements in relation to a follow-on offer.
- Allotment and Listing Timelines: The timelines for allotment and listing of InvIT units in a follow-on offer will be as per the timelines specified for an IPO.
- Interest Payment for Failure to Allot or List Units: The provisions under Regulation 14(4)(t) and Regulation 14(4)(u) regarding payment of interest in case of failure to allot or list units shall apply mutatis mutandis to follow-on offers.
- Restrictions on Further Issues of Units: An InvIT cannot undertake further issuance of units (public issue, rights issue, preferential issue, institutional placement, or otherwise) during the period between the filing of the draft follow-on offer document and the listing or refund of application monies.
- Submission of Follow-On Offer Documents:
- The InvIT must file a draft follow-on offer document with the SEBI through the merchant banker for observations, following the timelines for IPO observations as specified in the Master Circular.
- After incorporating SEBI’s observations, the final follow-on offer document must be filed with SEBI and recognized stock exchanges.
- Due Diligence Certificate: The merchant banker must submit a due diligence certificate in Form A and Form B of Annexure-1 of the Master Circular to SEBI along with the filing of the draft follow-on offer document.
[1]https://www.sebi.gov.in/legal/circulars/mar-2025/amendment-to-master-circular-for-infrastructure-investment-trusts-invits-dated-may-15-2024_93145.html