Table of Contents
Chapter 16: SEBI (InvIT) Regulations, 2014
Infrastructure Investment Trusts (InvITs) are specialized collective investment vehicles designed to mobilize institutional and retail capital into long-gestation infrastructure projects (highways, power transmission lines, gas pipelines, telecom towers, renewable energy parks). InvITs provide liquidity to project developers while delivering predictable yields to investors.
Workflow & Structure Diagram
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| SPONSOR (Developer) |
| - Min Net Worth: ₹100 Crores |
| - Min 5 yrs experience as developer |
| - Holds >= 15% units for min 3 years |
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v
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| TRUSTEE (Trust) |
| - Registered Debenture Trustee |
| - Holds legal title for unitholders |
| - Independent of Sponsor & Manager |
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v v
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| INVESTMENT MANAGER | | PROJECT MANAGER |
| - Investment decisions & treasury| | - Operations & Maintenance (O&M) |
| - Min Net Worth: ₹10 Crores | | - Physical asset performance |
| - >= 50% Independent Directors | | - Concession contract compliance |
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The Four Pillars of an InvIT
- The Sponsor: The corporate entity that sets up the InvIT trust and transfers underlying infrastructure Special Purpose Vehicles (SPVs) into the trust:
- Must have a net worth of at least ₹100 Crores;
- Must have a track record of at least five (5) years as an infrastructure developer;
- Must hold at least 15% of the total units of the InvIT for a minimum lock-in period of three (3) years from initial listing.
- The Trustee: An independent registered Debenture Trustee that holds the infrastructure assets and SPV shares in trust for the beneficial interest of unitholders.
- The Investment Manager: An incorporated company or LLP that oversees investment strategy, capital allocation, debt management, and statutory reporting:
- Must maintain a minimum net worth of ₹10 Crores;
- At least fifty percent (50%) of its board must comprise independent directors.
- The Project Manager: The operational entity responsible for the daily operation, toll collection, repairs, and maintenance (O&M) of the infrastructure assets.
InvITs can be structured either as Publicly Offered InvITs (listed on recognized stock exchanges) or Privately Placed InvITs (targeted at institutional investors).
Minimum Capital & Offer Thresholds
- Minimum Asset Value: The aggregate value of underlying infrastructure assets held by the InvIT must be at least ₹500 Crores at the time of initial offer.
- Minimum Offer Size: The public issue must raise a minimum of ₹250 Crores.
- Trading Lot: To encourage retail participation, SEBI eliminated large minimum lot sizes; InvIT units trade on stock exchanges in lots of 1 single unit.
Mandatory 80% Revenue-Generating Asset Rule
Under Regulation 18, the investment portfolio of a publicly offered InvIT must satisfy strict stability parameters:
- At least eighty percent (80%) of the total value of InvIT assets must be invested in completed and revenue-generating infrastructure assets.
- A maximum of twenty percent (20%) can be invested in under-construction infrastructure projects, equity shares of listed infrastructure companies, government securities, or money market instruments.
- This ensures that cash flows are stable, operational, and immediately available for distribution.
The primary economic appeal of InvITs lies in their statutory pass-through distribution model and prudent debt ceilings.
Mandatory 90% NDCF Distribution Mandate
- The InvIT must distribute not less than ninety percent (90%) of its Net Distributable Cash Flows (NDCF) to unitholders.
- Distribution must take place at least once every six (6) months for privately placed InvITs, and at least quarterly or semi-annually for publicly offered InvITs.
- Distributions must be paid to unitholders within fifteen (15) days from the date of declaration.
Borrowing & Leverage Limits (Regulation 20)
Workflow & Structure Diagram
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| InvIT BORROWING & LEVERAGE FRAMEWORK |
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| STANDARD LEVERAGE CAP: Aggregate consolidated net debt <= 49% of InvIT assets |
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| EXTENDED LEVERAGE CAP (Up to 70% of InvIT assets permitted strictly if): |
| 1. Credit Rating: A minimum credit rating of AAA is obtained from a registered CRA|
| 2. Track Record: InvIT has executed at least 6 consecutive regular distributions |
| 3. Unitholder Approval: Approved by at least 75% majority of unitholders by value |
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- If debt exceeds 49%, funds raised through additional borrowings can be deployed strictly in completed, revenue-generating assets.
The quadripartite governance model of InvITs requires clear operational boundaries and scrutiny of related party transactions.
Key Statutory Duties of Parties
- The Trustee: Must independently verify that the InvIT holds valid, unencumbered legal title to all infrastructure assets; ensure that NDCF distributions are declared and disbursed within regulatory timelines; and oversee the Investment Manager's compliance.
- The Investment Manager: Formulates acquisition strategy, appoints independent valuers, coordinates unitholder meetings, tracks debt covenants, and prepares quarterly financial statements.
- The Project Manager: Ensures infrastructure concessions (toll roads, transmission lines) meet statutory performance benchmarks, safety audits, and environmental compliances.
Governance of Related Party Transactions (RPTs)
Infrastructure developers frequently transfer their own completed projects into the InvIT, creating potential conflict of interest:
- Any acquisition or sale of infrastructure assets involving the Sponsor or related parties requires:
- Two Independent Valuations: Two separate valuation reports from independent principal valuers;
- Unitholder Approval: Approval by a special majority of unitholders where the Sponsor and interested parties are strictly barred from voting on the resolution.
Publicly listed InvITs are subject to extensive disclosure and transparency mandates under SEBI regulations.
Continual Disclosures under Listing Regulations
- Quarterly / Semi-Annual Financial Results: Must publish audited or limited reviewed financial statements within forty-five (45) days of period end.
- Material Event Disclosures: Immediate disclosure of any material toll rate revisions, regulatory disputes with government concessionaires (NHAI, state governments), force majeure disruptions, or debt rating changes.
- Annual Report: Dispatched to all unitholders at least twenty-one (21) days before the Annual General Meeting, including complete asset valuation summaries and debt maturity schedules.
Inspection and Enforcement
SEBI retains broad powers under Chapter VI to inspect the books of the InvIT, Trustee, or Manager. In the event of persistent default or fraud, SEBI may remove the Manager, appoint an administrator, or direct the compulsory delisting and winding up of the InvIT.