Markets regulator Sebi on November 27 came out with a framework pertaining to preferential issue as well as institutional placement of units by a listed REIT and InvIT. In a circular, the regulator has specified manner of issuance of units under preferential issue as well as institutional placement by listed real estate investment trust (REIT) and infrastructure investment trust (InvIT) and lock-in period.
Sebi said the issuer will have to disclose objects of the issue, related-party transactions, valuation, financial details, review of credit rating and grievance redressal mechanism in the placement document.
The Securities and Exchange Board of India (Sebi) had first notified REITs and InvIT Regulations in 2014, allowing setting up and listing of such trusts which are popular in some advanced markets.
Ever since Sebi introduced InvITs, the market witnessed listing of two public InvITs -- IRB InvIT Fund and India Grid Trust, while three InvITs -- IndInfravit Trust, India Infrastructure Trust, Oriental InfraTrust --- were privately placed. On the other hand, Embassy Office Parks REIT is the only listed real estate investment trust.
Sebi, in the circular, allowed listed REIT and InvIT to make preferential issue of units and institutional placement of units.
This is subject to several conditions including these investment vehicles obtaining in-principle approval of the stock exchanges for listing of units proposed to be issued, besides none of the respective promoters or partners or directors of the sponsor or manager or trustee of the REIT and InvIT is a fugitive economic offender.
Among other conditions, units of the same class, which are proposed to be allotted, have been listed on an exchange for a period of at least six months, prior to the date of issuance of notice to their unit holders for convening the meeting to pass the resolution provided in case of issuance of such units through institutional placement, the minimum listing period required will be 12 months.
Further, the REIT and InvIT have been barred from making any subsequent institutional placement until the expiry of six months from the date of the prior institutional placement made pursuant to one or more special resolutions, the regulator noted.
With regard to manner of issuance of unit, Sebi said that units shall be allotted in the dematerialised form only and shall be listed on the stock exchange where the units of the REIT and InvIT are listed.
"Any offer or allotment through private placement shall not be made to more than 200 investors (excluding institutional investors) in a financial year," it added.
The issue of units that is proposed to be made for consideration other than cash, the regulator said that full consideration for the units issued shall be paid by the allottees prior to the allotment of the units, through banking channels.
The regulator, further, said that all such money will be kept by the trustee in a separate bank account in the name of the REIT and InvIT and will only be utilised for adjustment against allotment of units or refund of money to the applicants till the time such units are listed.
After the allotment, REIT and InvIT need to make an application for listing of the units to the stock exchanges and such units need to be listed within seven days from the date of allotment.
In case REIT and InvIT fail to list the units within the specified time, Sebi said the money received needs to be refunded within 20 days from the date of the allotment. Further, if such money is not repaid within such time, the REIT and InvIT and their manager and director or partner who is an officer in default be jointly liable to repay that money along with an annual interest rate of 15 per cent.
According to Sebi, REIT and InvIT need to file an allotment report with Sebi within seven days of allotment of the units providing details of the allottees and allotment made. Placement document, if applicable, need to be filed with the regulator along with the allotment report.