Securities and Exchange Board of India (Sebi) in its board meeting held on Friday approved amendments in the regulations to facilitate growth of Infrastructure Investment Trusts (InvIT) and Real Estate investment Trust (REIT).
Among the top amendments approved — REITs are allowed to invest up to 20% in under- construction assets.
Sebi allowed REIT to invest in two level SPV structure through holding company (Holdco), subject to sufficient shareholding in the Holdco and the underlying SPV and other safeguards.
These safeguards include — REIT to have right to appoint majority directors in the SPVs and Holdco to distribute 100% cash flows realised from underlying SPVs and at least 90% of the remaining cash flows.
The regulator has also clarified the definition of ‘real estate property’ in the regulations, subject to certain conditions. The important ones are, removing the limit on the number of sponsors and introducing the concept of sponsor group, allowing REITs to invest upto 20% in under construction assets and amending the definition of the valuer. Sebi has also clarified the definition of ‘associates’ and ‘related parties’ in the regulations.
Sebi has also clarified the definition of ‘associates’ and ‘related parties’ in the regulations.
As for InvITs, like REITs, Sebi has allowed investment in two level SPV structure through Holdco, subject to sufficient shareholding in it. Also, Holdco will distribute 100% cash flows realised from underlying SPVs and at least 90% of the remaining cash flows, among other similar amendments.
In addition, Sebi reduced the mandatory sponsor holding in InvIT to 15%, and rationalised the requirements for private placement of InvIT. Sebi had proposed these amendments in the last few months.
According to experts, the raising of the limit from 10% to 20% in under construction assets will give REITs more flexibility to choose lucrative projects. The earning potential in under construction projects is far higher than income generating ones, which will translate to more returns for investors of the REIT.
The changes also mean that several companies will now be able to move ahead with their REIT plans without changing the existing capital structure. Until now, the companies had to dissolve the holding company structure, and bring the existing SPVs under the parent company, REIT experts told FE.
Also, the changes are favourable to small real estate companies now, as five different companies, with limited number of assets can pool them together for a REIT listing.
For InvITs reducing the mandatory sponsor holding to 15% means that there will be more liquidity available for the companies to invest into future infrastructure assets.
Easier rules for fund managers
To make it easier for foreign fund managers keen to relocate to India, markets regulator Sebi on Friday decided to allow them to act as Portfolio Managers under a relaxed regulatory regime.
The move assumes significance in the wake of the government already having announced taxation incentives for the offshore fund managers willing to relocate to India.
Registration for market intermediaries
To facilitate the ease of doing business, Sebi on Friday decided to provide permanent registration to merchant bankers, investment advisers, research analysts and eight other categories of market intermediaries.
Proposes ban on tips via bulk SMSes, e-mails
Coming down hard on fraudulent investment advisers, regulator Sebi on Friday proposed to ban trading tips via bulk SMSes and emails, as also to clamp down on games, competitions and leagues relating to the securities market.
Sebi also plans to curb unsolicited investment advice and promotion of investment products through electronic and broadcasting media platforms.
Staff quota in public offers up at R5 lakh
Allowing companies to allot more shares for their employees during public offers, markets regulator Sebi on Friday increased the limit for the value of such allotments to R5 lakh, up from R2 lakh currently, under staff quota. The move follows representations requesting Sebi to consider relaxing its regulations to enable employees to apply for shares beyond the limit of R2 lakh per employee.
Overseas investors can hold 15% stake
Markets regulator Sebi on Friday allowed foreign investors to own up to 15% stake in domestic stock and commodity exchanges, a move that is expected to help attract more overseas funds. Currently, foreign entities can hold only up to 5% stake in an exchange.
Source: Financial Express