Fast-track rights issue: SEBI comes out with guidelines for REITs, InvITs

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Markets regulator Sebi on Friday put in place a framework for emerging investment instruments REITs and InvITs for issuance of units under the fast-track rights issue mode. This comes after the regulator earlier this month allowed fast-track rights issue by (REITs) and infrastructure investment trusts (InvITs) without filing draft offer document with Sebi.

In a circular, the regulator said listed REITs and InvITs desirous of issuing units under fast-track rights issue will have to comply with certain guidelines.

The units of these instruments should be listed on any stock exchange for a period of at least three years immediately preceding the record date and all the units of the InvIT and REIT are held in demat form on the record date.

Among other conditions, the average market capitalisation of public unitholding of InvIT and REIT each should be at least Rs 250 crore and these investment instruments need to redress at least 95 per cent of the complaints received from the investors till the end of the quarter immediately preceding the month of the record date.

Sebi said there should not be any regulatory action imposed on the InvIT and REIT in the three years preceding the year in which rights issue has been proposed. The imposition of monetary fines by stock exchanges on the InvIT will not be a ground for ineligibility for undertaking issuances under this clause.

Further, there should not be any show-cause notices issued or prosecution proceedings initiated or pending against these instruments or their promoters or directors; they also should not have settled any alleged violation under the settlement mechanism; and units of InvIT and REIT should not be suspended from trading as a disciplinary measure during last three years immediately preceding the record date.

“The sponsor(s) shall mandatorily subscribe to their rights entitlement and shall not renounce their rights, except for the purpose of complying with minimum public shareholding norms prescribed under the InvIT/REIT Regulations,” the Securities and Exchange Board of India (Sebi) said.

With regard to preferential issue and institutional placement of units by listed InvITs and REITs, Sebi said units allotted to sponsor and its associate will be locked-in for three years from the date of trading approval granted for the units.

This is provided that not more than 25 per cent of the total unit capital of the InvIT and REIT will be locked-in for three years and units allotted in excess of 25 per cent need to be locked in for one year.

The lead merchant banker will have to ensure that the information contained in the draft document and the particulars as per audited financial statements are not more than six months old from the issue opening date.

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