Sebi releases framework for issue of subordinate units in privately placed InvITs

The subordinate units shall not carry any voting rights or distribution rights. (Representational image)

Subordinate units of a privately placed infrastructure investment trust (InvIT) can only be issued to a sponsor, its associates and sponsor group; and the units will not have any voting rights or distribution rights, said the framework released by the market regulator.

The Securities and Exchange Board of India (SEBI) has amended the Infrastructure Investment Trusts (InvIT) regulations to allow issue of subordinate units only by privately placed InvITs on acquisition of an infrastructure project.

The amendment had been approved by the regulator's Board on March 15.

Also read: Privately placed InvITs can now issue subordinate units, says SEBI

Through notification issued on May 27, 2024, the regulator released the framework. The framework was shared on the regulator's website on May 28.

The other conditions under the issue of these units include those listed below:

*The subordinate units shall be issued only to the sponsor, its associates and the sponsor group and shall be deemed to be a part of the consideration for acquisition of the infrastructure project from such sponsor, its associates and the sponsor group.

*The subordinate units shall not carry any voting rights or distribution rights.

*The subordinate units shall be issued in a dematerialized form with an International Securities Identification Number, distinct from that of the ordinary units.

*The subordinate units shall be listed on a recognised stock exchange after their reclassification into ordinary units in accordance with the provisions contained in these regulations.

*The subordinate units may be issued by way of an initial offer or any offer subsequent to the initial offer, either along with the issue of ordinary units or without the issue of ordinary units.

*The issue of subordinate units made after the initial offer by the InvIT shall require the approval of the unitholders where votes cast in favour of the resolution shall not be less than one and a half times the votes cast against the resolution:

Provided that any unitholder who is party to the acquisition of the infrastructure project including the sponsor, its associates and sponsor group, shall not be entitled to vote.

*The price of subordinate units shall be determined according to the pricing guidelines applicable for issuance of ordinary units.

*The amount of subordinate units issued at the time of acquisition of an infrastructure project by the InvIT shall not exceed ten percent of the acquisition price of the infrastructure project.