SEBI proposes financial disclosure framework for InvITs

By PTI

  • 09 Jul 2016
Other | Credit: Reuters

To attract more entities to set up Infrastructure Investment Trusts, Sebi today proposed an elaborate framework for financial disclosures in the offer document as well as for valuation of the units held by InvITs.

The trusts have been suggested to disclose management discussion and analysis that mentions the quality of earnings and revenues as well as the key risks for operations.

InvITs was introduced by Sebi in 2014 as an investment vehicle, which would enable promoters to monetise completed assets and make it easier to raise funds for infrastructure projects.

Coming out with the consultation paper, the watchdog said it proposes a "framework for disclosures in offer document/ placement memorandum and for valuation of the units of InvIT".

Among others, InvITs would have to present project-wise details of operating cash flow for all the assets that are included in such financial information for three years.

"The InvIT shall also disclose Earnings per Unit (EPU) for the previous three years," as per the consultation paper.

In cases when combined financial statements are presented, EPU can be determined on the basis of the capital structure, as has been put in place for the purposes of listing.

The offer document of InvIT should have the summary of the audited consolidated financial statements of manager and sponsor for the past three years. The same should be prepared in accordance with Companies (Indian Accounting Standards) Rules, 2015 and the Companies Act, 2013.

According to the consultation paper, InvITs need to prepare and disclose Management Discussion and Analysis (MDA), based on the historical financial statements.

The MDA should mention key risks, quality of earnings and an analysis of reasons for the changes in significant items of income and expenditure.

The consultation paper has been prepared keeping in mind that InvITs might hold infrastructure assets through special purpose vehicle as well as directly.

"Depending upon the structure of holding of the infrastructure assets, the respective Acts ie the Companies Act, 2013/ LLP Act, 2008 shall be applicable on such structures, mutatis mutandis," Sebi said.

The disclosure of consolidated financial statements, as envisaged in the paper, would be applicable only when the InvIT hold assets through SPV as well.

A committee, having representatives from the Institute of Chartered Accountants of India (ICAI) and the industry, had given its recommendations pertaining to accounting and auditing norms for InvITs.

The consultation paper would be open for public comments till July 31.

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