SEBI Greenlights Subordinate Units for Private InvITs

18 Mar 2024 , 10:25 AM

Subordinate units can now be issued by privately placed Infrastructure Investment Trusts (InvITs), the Securities and Exchange Board of India (SEBI) said on March 15 following a meeting with its Board.

The press release issued by SEBI read: “The Board, inter-alia, approved amendments to SEBI (Infrastructure Investment Trusts) Regulations, 2014 to provide a framework for issuance of subordinate units by privately placed InvITs only to start with.”

“To enable usage of subordinate units to bridge the valuation gaps that may arise as a result of difference in the valuation of an asset assessed by the Sponsor (in its capacity as the asset seller) and the InvIT (in its capacity as the asset buyer),” it continued, “is the goal of the framework for issuance of subordinate units.” Regarding such units, the framework is intended to incorporate risk reduction strategies as well.”

The regulator suggested in a consultation document dated December 9, 2023, about the framework for issuing subordinate units for REITs and InvITs that subordinate units should only be offered on a private placement basis to the sponsor(s), sponsor group, or associates of the sponsor(s).

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