SEBI Revises Rules for Minimum Public Unitholding in Infrastructure Investment Trusts

The Securities and Exchange Board of India (SEBI), vide circular SEBI/HO/DDHS-PoD-2/P/CIR/2023/174 dated October 31, 2023, introduced significant changes to the methods for achieving minimum public unitholding requirements for Infrastructure Investment Trusts (InvITs), particularly affecting privately placed InvITs.

These adjustments build on SEBI’s prior circular vide reference SEBI/HO/DDHS/PoD2/P/CIR/2023/107 issued on June 27, 2023, which was consolidated as Chapter 21 in the Master Circular for InvITs dated July 6, 2023.

Key amendments in the circular:

• Privately placed InvITs are now permitted to achieve the minimum public unitholding requirement by issuing units through preferential allotment, with the stipulation that only units issued to the public will be counted towards compliance. This addition provides privately placed InvITs with an alternative approach to meeting public unitholding standards while ensuring transparency in unit distribution.

SEBI has modified Method No. 7 under Paragraph 21.2 of Chapter 21 of the Master Circular dated July 6, 2023, concerning the sale of units held by sponsors, investment managers, project managers, and related entities. The modification introduces a cap specifically for privately placed InvITs, which exempts them from certain conditions applicable to other InvITs. This also offers flexibility by providing two distinct mechanisms to comply with public unitholding requirements.

• The circular requires that Investment Managers make announcements regarding these transactions and underscores the need to comply with all applicable legal provisions, including insider trading regulations, to ensure transparency in unit sales and allotments.

SEBI aims to strengthen regulatory practices for InvITs, particularly enhancing flexibility for privately placed InvITs while maintaining rigorous standards for public unitholding compliance.