An Infrastructure Investment Trust (InvIT) is similar to a mutual fund in that it allows individual and institutional investors to invest directly in infrastructure projects and get a piece of the revenue as a return. The InvIT is set up in a tiered structure, with the Sponsor establishing the InvIT, which then invests directly or through special purpose companies in qualified infrastructure projects (SPV). The SEBI (Infrastructure Investment Trusts) Regulations, 2014 govern InvITs.
2. What is the procedure for becoming a registered InvIT?
Under the SEBI (Infrastructure Investment Trusts) Regulations 2014, no one may function as an InvIT unless they have secured a certificate of registration from the Board. The sponsor on behalf of the trust must submit an application for a certificate of registration as an InvIT in Form A as stated in Schedule I of the SEBI (Infrastructure Investment Trusts) Regulations 2014, together with a non-refundable application fee as provided in Schedule II. When the Board is satisfied that the applicant meets the requirements, it will notify the applicant, and upon receipt of the registration fees as indicated in Schedule II, it will issue a certificate of registration in Form B under Schedule I.
Any company, LLP, or other legal entity that establishes the InvIT is referred to as a “sponsor.” If the sponsor is a body corporate or corporation, it must have a net worth of at least US$15.38 million; if it is an LLP, it must have net tangible assets worth at least US$15.38 million. On a post-issue basis, the sponsor(s) must hold not less than 15% of total InvIT units for a period of at least 3 years from the date of listing, subject to the following: a) Sponsors would be liable to the InvIT for all acts, omissions, and representations/covenants made to the InvIT; b) Unless unitholders choose a suitable replacement, the project manager will be the sponsor/associate of the sponsor for a minimum of three years. This condition does not apply, however, if the sponsors keep a minimum of 25% post-issue share for at least 3 years from the date of listing. c) Each sponsor must have at least 5 years of experience in the infrastructure industry, and if the sponsor is a developer, at least two of the sponsor’s projects must be completed.
4. What are the disclosure requirements for infrastructure Investment Trusts?
The following are the disclosure requirements for an Infrastructure Investment Trust (InvIT): In line with sub-section (4), section (15), Chapter IV, and any circular issued by the Board in this regard, disclosure in the placement memorandum for privately-placed InvIT. Schedule III and any circular issued by the Board in this regard must be disclosed in the offer document for publicly-offered InvITs.
5. What are the terms and circumstances for issuing and allocating units in InvITs?
• An InvIT may not make an initial offer of its units unless it is:
• has assets worth at least INR 500 crores; and
• has an offer size of at least INR 250 crores.
• Minimum offer size slabs and public float slabs:
• If the post-issue capital is less than INR 1600 crores, a minimum of 25% of the InvIT’s total outstanding units or INR 250 crores, whichever is larger, is required.
• Minimum INR 400 crores if post-issue capital is equal to or greater than INR 1600 crores but less than INR 4000 crores.
• If the post-issue capital is greater than INR 4,000 crores: a minimum of 10% of the InvIT’s total outstanding units
• Any units offered to a sponsor, manager, or their associated parties or affiliates are not counted toward the units available to the general public.
• The public float must be increased to a minimum of 25% within three years of the date of listing in all situations.
• An investor’s minimum investment in a privately placed InvIT should be INR 1 crore. However, if such an InvIT invests or offers to invest 80% or more of the value of the InvIT assets, an investor’s minimum contribution must be INR 25 crore.
• In the case of a public InvIT, the minimum initial and follow-on subscription from an investor will be INR 10 lakh.
As stated in the offer contract, up to 10% of the money raised by InvIT through a public offering of units can be utilised for “general purposes.” Expenses relating to the issue will not be included in the general purpose budget.
• A minimum subscription quantity of 90% of the fresh issue size mentioned in the offer document is required.
• If an InvIT fails to make a public or private offering of its units within three years of its registration with the Board, it must relinquish its certificate of registration to the Board and cease to operate as an