Markets regulator Securities and Exchange Board of India (SEBI) on January 17 put in place a framework for the rights issue of units by listed REITs and InvITs, calling for disclosure of objects of the issue, financial details in the offer document by such investment instruments. In two separate circulars, the regulator specified the manner of issuance of units under the rights issue by listed real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
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 regulator had first notified REIT 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 and Oriental InfraTrust — were privately placed. On the other hand, Embassy Office Parks REIT is the only listed real estate investment trust.
SEBI has allowed listed REITs and InvITs to make a rights issue 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 and should not be barred from the securities market.
With regard to pricing, SEBI said that the investment manager on behalf of the REIT and InvIT, in consultation with the lead merchant banker(s), will decide the issue price before determining the record date.
The investment manager, on behalf of InvIT and REIT need to announce the record date to stock exchange at least three working days (excluding the date of intimation and the record date) prior to the record date. InvIT and REIT will not withdraw its rights issue after announcement of the record date.
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.
"The minimum subscription to be received in the rights issue shall be 90 per cent of the issue size through the letter of offer, " Sebi noted.
The InvIT and REIT "shall not make any further issue of units in any manner whether by way of public issue, rights issue, preferential issue, qualified institutions placement, institutional placement, issue of bonus shares or otherwise during the period between the date of filing the draft letter of offer with the board and the listing of the units offered through the letter of offer or refund of application monies."
In November, Sebi had come out with guidelines pertaining to preferential issue as well as institutional placement of units by a listed REIT and InvIT.
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