SEBI Expands Permissible Use of Borrowings for InvITs

The Securities and Exchange Board of India (SEBI), vide Circular bearing reference no. SEBI/HO/DDHS/DDHS-PoD-2/P/11700/2026 dated May 15, 2026 (the “Circular”), has introduced a significant clarification regarding the permissible utilisation of borrowings by Infrastructure Investment Trusts (InvITs) where net borrowings exceed forty-nine percent of the value of InvIT assets. The Circular follows the amendment introduced to Regulation 20(3)(b)(ii) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 on April 17, 2026, which expanded the scope of permissible borrowing utilisation above the prescribed threshold.

InvITs are permitted to raise borrowings and deferred payments subject to specified limits. However, where consolidated borrowings exceed forty-nine percent of the value of InvIT assets, such borrowings can only be utilised for purposes expressly permitted by SEBI. The April 2026 amendment expanded the permissible end-use framework, while the present Circular operationalises and clarifies the categories of utilisation that would qualify as permissible.

A key feature of the Circular is the recognition of capital expenditure incurred for enhancement of asset performance or capacity augmentation as a permissible utilisation of borrowings above the prescribed threshold.

The Circular further recognises major maintenance expenditure in respect of road projects as a permissible utilisation category and distinguishes such expenditure from routine maintenance activities. SEBI clarifies that major maintenance expenditure must:

1. relate to obligations specified under the concession agreement; and
2. constitute non-routine maintenance expenditure.

The Circular additionally clarifies that the relevant road projects shall be those falling within the “Roads and Bridges” infrastructure sub-sector identified under the Ministry of Finance notification dated September 19, 2025, including any amendments or additions thereto.

The Circular also recognises refinancing of debt by InvIT, Special Purpose Vehicle (SPV) or Holding Company (Holdco) as a permissible use of fresh borrowings above the threshold subject to specific safeguards to ensure disciplined refinancing practices. The Circular provides that:

1. The original debt refinanced must have been utilised for permissible purposes under the InvIT Regulations; and
2. Only the principal portion of the debt may be refinanced. Accumulated interest, fees or other charges cannot be refinanced.

The Circular therefore restricts refinancing to the principal component of eligible debt while excluding accumulated interest and ancillary financing costs from the scope of refinancing.

By expanding the categories of permissible utilisation of borrowings above the prescribed leverage threshold, the Circular provides additional clarity regarding the deployment of debt within the InvIT framework. The clarification may assist InvITs and associated entities in evaluating the permissible use of borrowings for infrastructure assets and related financing arrangements.