Markets regulator Sebi has notified rules to reduce the minimum allotment lot in the primary market for privately placed infrastructure investment trusts (InvITs) to Rs 25 lakh, aligning it with the trading lot size in the secondary market. Prior to this, the minimum allotment lot in the primary market for privately placed InvITs was Rs 1 crore or Rs 25 crore, depending on the asset mix. However, in an earlier round of reforms, the trading lot size in the secondary market had already been reduced to Rs 25 lakh, irrespective of the asset mix.
Accordingly, this amendment introduces a uniform minimum allotment size of Rs 25 lakh in the primary market for all privately placed InvITs, harmonising it with the secondary market norms.
Also, the regulator, through separate notifications dated September 1, enhanced the ease of doing business for the activities of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) by amending rules.
Under the norms, Sebi said the related parties of the REIT/InvIT and the related parties of the sponsor, investment manager/manager, and project manager would not be considered as “public” unless such related parties are Qualified Institutional Buyers (QIBs). Moreover, they would always be excluded from the “public” category irrespective of their status as QIBs.
Prior to this amendment, any units held by the related parties of the Sponsor, Investment Manager/Manager, and Project Manager were not counted towards units held by the “public”.
The amendment now facilitates the classification of units held by the related parties of these entities who are QIBs as public. Also, the regulator said, “if the net distributable cash flow generated by the holdco on its own is negative; the holdco may adjust it against the cash flows received from its underlying SPVs provided that it makes appropriate disclosures in this regard to the unitholders in such form and manner as may be specified by the Board (Sebi)”.
Earlier, a holdco was required to distribute 100 per cent of the cash flows received from the underlying SPVs to the REIT/InvIT. This amendment enables a holdco (holding company) to offset its own negative cash flows before distributing the net amount to the REIT/InvIT. The regulator aligned timelines for submission of various reports, including quarterly reports to be submitted to stock exchanges, trustees, and the board of the investment manager, as well as valuation reports, with the timelines for submission of financial results.
Earlier, different timelines were prescribed for the submission of these reports. Separately, the regulator has amended portfolio managers rule to simplify the format for disclosure document.
“The portfolio manager shall provide to the client, the disclosure document, in the format as may be specified by the Board, along with a certificate in Form C as specified in Schedule I, prior to entering into an agreement with the client,” Sebi said. The amendments came after the board of Sebi approved a proposal in this regard in June.
Easier delisting rules for PSUs with 90% govt holding The market regulator also introduced special measures for voluntary delisting of PSUs, where the government owns 90 per cent or more stake, in a move aimed at streamlining the exit process.
Such measures include relaxations from the requirement of a two-thirds threshold for approving delisting by public shareholders and in the mode of computation of the floor price. Also, such delisting can happen at a fixed price — at least 15 per cent premium over the floor price-- regardless of trading frequency.
In its notification dated September 1, Sebi said the rule is applicable for PSUs-- excluding banks, Non-banking Financial Companies (NBFCs) and insurance companies — where the state owns 90 per cent or more stake. The floor price for delisting will be calculated using the highest of three options — volume weighted average price paid during the 52 weeks immediately preceding the reference date; highest price paid during the 26 weeks immediately preceding the reference date; and the price determined by the joint valuation report obtained by two independent registered valuers.
Under the current earlier delisting rules, delisting is successful if promoter shareholding reaches 90 per cent. Moreover, the floor price for delisting is calculated using several pricing metrics such as the 60-day average price and the highest price in the last 26 weeks.
PSUs, delisted under this special provisions, undertaking voluntary strike-off which if, effected after the date of delisting but not later than 30 days from the expiry of the one-year period subsequent to delisting, then the amount which is due to the public shareholders who have not tendered their shares during the period of one year from the date of delisting would be transferred to an appropriate account of designated stock exchange.
This would be held for a period of 7 years, during which time the investors can claim such amount from the stock exchange.