SEBI Proposes Revised NDCF Framework for Road InvITs

The Securities and Exchange Board of India (SEBI) has issued a consultation paper dated June 1, 2026, proposing amendments to the framework governing the computation of Net Distributable Cash Flow (NDCF) for Infrastructure Investment Trusts (InvITs) in the roads and bridges sector.

The proposal seeks to address industry concerns regarding the treatment of debt incurred for financing major maintenance (MM) expenses of road projects.

Under the existing SEBI framework, distributions by InvITs to unitholders cannot be funded through external borrowings. Since major periodic maintenance expenses are recognised as operating expenditure under applicable accounting standards, rather than being capitalised, such expenses reduce the InvIT’s operating cash flows and, consequently, its NDCF, even where the expenditure has been financed through external debt.

Following representations from the Bharat InvITs Association (BIA), SEBI has proposed permitting InvITs to add back payments made towards major maintenance expenses while computing NDCF to the extent that such expenses are funded through external borrowings.

To safeguard investor interests and ensure prudent financial management, SEBI has proposed the following conditions:

• Auditor Certification: Only the amount of major maintenance expenditure actually funded through external debt and certified by the statutory auditor of the InvIT will be eligible for the proposed add-back.
• Unitholder Approval: Prior approval of unitholders will be mandatory, requiring at least 60% of the votes cast in favour of the resolution. Such approval may be obtained either as a one-time approval covering the entire project life cycle or for specific major maintenance programmes. Any increase in borrowings beyond the approved limits would require fresh unitholder approval.
• Disclosures shall be made as part of financial results and reports of the InvITs of the Net Borrowing Ratio, aggregate amount of borrowing raised, Major Maintenance Expenses outstanding, and debt maturity profiles.

SEBI invited public comments on the proposal until 22 June 2026. If implemented, the proposal is expected to mitigate the impact of cyclical major maintenance expenditure on distributable cash flows, thereby enhancing distribution stability for investors. From a project finance perspective, the proposed framework could improve valuation certainty for road InvITs, strengthen long-term yield predictability, and support the monetisation of operational road infrastructure assets.