MUMBAI: Proposing a slew of amendments to the extant norms guiding the Reits (Real Estate Investment Trusts) and Invits (Infrastructure Investment Trusts), the markets watchdog Securities & Exchange Board of India (SEBI) has proposed a framework to fast-track follow-on offers by the sponsors of these two market instruments, to help make fundraising more efficient.
The key measure mooted is a three-year lock-in provision for 25% of the preferential issues allotted to sponsors of Invits and 15% for the sponsors of Reits, and a one-year lock-in for the rest and mandates minimum public unit-holding at 25% -- on par with the issuer of regular equities and have to be issued in the dematerialised form only.
In a consultation paper issued on Thursday, Sebi proposed that 15% of the units allotted to sponsors and sponsor groups will be locked-in for three years from the date of trading approval granted for the units and the remaining units allotted to them will be locked-in for one year.
The Sebi has sought public comments by March 13 on its proposals. These amendments seek to amend the master circulars on Invits and Reits, both dated May 15, 2024.
The Sebi said the move to being in a framework to fast-track follow-on offers by Invits sponsors is aimed making the fund raising process more efficient apart from promoting ease of doing business. It also said proposals in the paper are based on the representation and inputs received from industry associations and the recommendations of the hybrid securities advisory committee.
With regards to follow-on offer (FPO), Sebi said such issue is one of the mechanisms for raising funds subsequent to issue of units after initial public offer.
Reits and Invits making an FPO needs to ensure that they make an application to the exchanges on which their units are listed and seek an in-principle approval for listing of their units on the exchanges. They also need to choose one of them as the designated stock exchange, says the paper.
The manager and the merchant bankers should be responsible for obtaining in-principle approval and final listing and trading approvals from the stock exchanges, it adds.
The minimum public units-holding should be at least 25 percent of the total outstanding units of the Riets on a post-issue basis.
"A Reit/Invit shall not undertake any further issue of units in any manner whether by way of public issue, rights issue, preferential issue, institutional placement or otherwise, except pursuant to a unit-based employee benefit scheme (if any) during the period between the date of filing of the draft FPO/follow-on offer document and the listing of the units or refund of application money," says the paper.
Further, Reits/Invits should also file the draft follow-on offer documents, through the merchant bankers with the Sebi, for its observations.
The follow-on offer document, after incorporating the observations of the Sebi, will be filed with the regulator and stock exchanges. The merchant banker should, along with the filing of the draft follow on offer, furnish due diligence certificate to Sebi.
Last week, the regulator proposed Reits and Invits to disclose financial information in their offer documents in line with public issue and listing norms.
When it comes to Invits, the main change will come in chapter 2 of the May 15, 2024 master circular, while for Reits its chapter 3 that will have the maximum changes.