On 27-5-2024, the Securities and Exchange Board of India notified the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2024 to amend the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014. The provisions came into force on 27-5-2024.
The amendment inserts Chapter IVA relating to Framework for Issuance of Subordinate Units.
Key Points:
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Applicability- apply only to subordinate units issued after this chapter has been notified.
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Issuance of Subordinate Units-
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Can be issued only by a privately placed InvIT upon acquisition of an infrastructure project.
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Can be issued only to sponsor, its associates and the sponsor group and it will be a part of the consideration for acquisition of the infrastructure project.
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These units will not carry any voting rights or distribution rights.
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These units will be issued in a dematerialized form with an International Securities Identification Number.
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Transfer of Subordinate Units-
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These units will be locked in till its reclassification into ordinary units.
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It can be transferred only to sponsor/ its associates and sponsor group entities.
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Entitlement date/ event and performance benchmark-
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Entitlement date, the entitlement event and the performance benchmark for reclassification of subordinate units to ordinary units shall be clearly defined and specified in the Term Sheet.
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The performance benchmark should be quantifiable, objective and based on the audited financial statements.
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Minimum time period between issuance of subordinate unit and entitlement date for reclassification will be 3 years.
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Progress related to achievement of performance benchmark-
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Investment manager will monitor the progress and report it annually after obtaining certificate by statutory auditor og InvIT and approval of the trustee and the audit committee.
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Th progress will be disclosed in the Annual Report of InvIT by the investment manager.
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