The Securities and Exchange Board of India (SEBI) has introduced guidelines that allow listed infrastructure investment trusts (InvITs) to raise capital by way of preferential allotment to institutional investors.
The capital markets regulator's latest norms, issued on Tuesday, is the latest move to boost investments in InvIT and real estate investment trusts (REIT), which have failed to generate investor interest despite several regulatory initiatives.
SEBI had first introduced rules for InvITs and REITs four years ago, paving the way for listing of such trusts. Two InvITs floated initial public offerings last year, though their performance has been lacklustre. This has deterred other InvITs from floating their IPOs. Not a single REIT has been listed in the country.
SEBI said listed InvITs can now allot units to a minimum of two and a maximum of 1,000 investors in a financial year. Such listed trusts will be required to file placement documents giving complete disclosures and material information, besides stating the objects of the fundraise. These trusts will be required to file their documents with stock exchanges.
Units issued via preferential allotments cannot be priced below the average closing high and low price two weeks preceding the relevant date.
“The units to be issued in (the) preferential issue shall be of (the) same class or kind as the units issued in the initial offer by the InvIT… No allotment shall be made, either directly or indirectly, to any party to the InvIT or their related parties except to the sponsor only to the extent that is required to ensure complains with the regulations,†SEBI said in a circular.
SEBI has relaxed various rules over the past year to make InvITs and REITs popular among investors.
In January, SEBI allowed strategic investors such as multilateral financial institutions and non-banking financial companies (NBFCs) to invest up to 25% of total offer size in such trusts. In September last year, SEBI had allowed these trusts to raise funds by issuing debt securities.
However, SEBI's attempts haven't had the desired impact thus far. In August last year, VCCircle had reported that billionaire Gautam Adani-controlled Adani Group had called off plans to float an InvIT for its power transmission arm anticipating few takers.
Road developer IRB Infrastructure Developers Ltd became the first Indian company to tap into the markets with an InvIT, in May last year. Several large foreign institutions, including Singapore sovereign wealth fund GIC, Australia’s Platinum Asset Management and the UK’s National Westminster Bank, lined up for anchor allocation. The IPO received high demand.
The IRB InvIT Fund, however, made a muted stock market debut with its units listing at a slight premium to the fund’s initial offer price. That rubbed off on Sterlite Power Grid Ventures’ India Grid InvIT whose public offer coincided with IRB InvIT’s listing. Sterlite Power’s InvIT fared even worse, with the IPO struggling to find investors.
This dampened investor sentiment at a time when at least five other infrastructure companies were seeking to float IPOs of InvITs.
Last month, however, the IndInfravit Trust of L&T Infrastructure Development Projects Ltd (L&T IDPL) listed on the stock exchanges by selling units through a private placement.