SEBI Revises Net Distributable Cash Flows Framework for InvITs

The Securities and Exchange Board of India (SEBI), vide its circular bearing reference no. HO/17/11/17(5)2026-DDHS-POD2/I/18791/2026 dated August 14, 2026 (the “Circular”), has revised the framework for computation of Net Distributable Cash Flows (NDCF) by Infrastructure Investment Trusts (InvITs) under the Master Circular for Infrastructure Investment Trusts dated July 11, 2025. The revision permits InvITs to add back payments made towards major maintenance expenses for road projects, to the extent funded through external borrowing, while computing NDCF. The revised framework has come into force with immediate effect.

The amendment has been introduced following requests from industry and recommendations of the Hybrid Securities Advisory Committee (HySAC) and public consultation. Under the revised framework, such payments may be added back while computing NDCF at the HoldCo/SPV level; and the Trust level. This enables the amount used for debt-funded major maintenance to be excluded from the cash flow computation for distribution purposes, subject to the conditions prescribed under the Circular.

The Circular defines the scope of the new mechanism and prescribes that:

• “Road Project” means a project falling within the “Roads and bridges” infrastructure sub-sector specified in the Ministry of Finance notification dated September 19, 2025, including subsequent amendments or additions;
• “Major maintenance expense” means expenditure incurred on maintenance of a road project which is not routine maintenance and is incurred in accordance with the obligations and requirements under the relevant concession agreement; and
• only payments towards such expenses that are funded through external debt will qualify for add-back.

The ability to add back such expenses is subject to prior approval of unitholders, with votes cast in favour required to be at least 60% of the total votes cast. The approval is required for each project for which the investment manager proposes to raise borrowing for major maintenance and may be obtained:

• on a one-time basis for debt already availed or proposed to be availed over the entire project life cycle; or
• for a specific major maintenance expense.

Any deviation requiring additional borrowing beyond the approved proposal will require fresh unitholder approval before the debt is availed.

The Circular also strengthens disclosure requirements before and after such borrowing. The explanatory statement accompanying the unitholder approval must disclose, inter alia:

• details of the projects, SPVs or Holdcos for which borrowing is proposed or has been raised;
• categories and indicative project-wise and year-wise estimates of major maintenance expenses incurred as per the latest valuation report;
• the potential impact of such borrowing on the future growth potential and distributions of the InvIT; and
• alternative sources of funding in the event debt is not available for future major maintenance requirements.

The Circular further introduces certification and disclosure requirements to ensure that the add-back is limited to major maintenance expenses actually funded through external borrowing. In this regard:

• The statutory auditor shall certify that the major maintenance expenditure has been incurred in accordance with the obligations and requirements under the relevant concession agreement and has been funded through external borrowing;
• The InvIT shall make appropriate disclosures in its annual, half-yearly and quarterly reports, as applicable, including:
  • separate identification of borrowings undertaken for major maintenance expenses in the Net Borrowing Ratio;
  • the aggregate amount of borrowings raised and outstanding debt towards major maintenance expenses; and
  • the debt maturity profile relating to borrowings undertaken for major maintenance expenses.

The Circular marks a significant shift in the NDCF framework by providing greater flexibility to road-sector InvITs to fund substantial maintenance requirements through external debt without the corresponding expenditure reducing the NDCF available for distribution, while retaining safeguards through unitholder approval, auditor certification and enhanced disclosures.