SEBI notified the Infrastructure Investment Trusts Regulations (InvIT Regulations) on September 26, 2014 for registration and regulation of InvITs in India. Subsequently, SEBI issued circular to allow investment by foreign portfolio investors and guidelines for public issue of units of InvITs. Pursuant to the feedback received from various market participants, SEBI, in its board meeting held on September 23, 2016, has further approved certain changes in the InvIT Regulations.
Under regulation 2(1)(zy), holding of assets by SPVs in another SPVs was prohibited, limiting the scope of infrastructure assets that can be held by a SPV. SEBI has allowed investment by an SPV in another by permitting InvIT to invest in the SPV through a holding company, subject to presence of sufficient shareholding in both SPV and holding company, and a right to appoint majority directors by the InvIT in the SPV. Further, the holding company which has invested in SPV is obligated to distribute the whole of cash flows received from the SPV and at least 90% of its remaining cash flows in order to meet the yield requirements of the investors. SEBI has reduced the mandatory holding of the sponsor in InvIT to 15% from the initial requirement of 20% to provide the sponsors an opportunity to invest further in new infrastructural projects.
Further, a change in the definition of valuer has also been proposed however, the details of the same has not been specified yet. In a prior consultation paper, SEBI had proposed to add more professional bodies, such as members of Institute of Engineers, exercising expertise in this industry in the definition of valuer, as opposed to the present definition which includes only independent merchant bankers or chartered accountants.
SEBI has tried to create a more facilitative regulatory framework for the formation and registration of InvIT in India, in order to promote investment in infrastructural sector which is one of the biggest employers in the economy. Notably, no InvIT has been formed since the inception of these regulations.