SEBI hikes leverage limits for InVits to 70%

Last Updated: Sat, Mar 02, 2019 14:21 hrs
Sebi

New Delhi: In a bid to attract more investors to investment trusts, market regulator SEBI on Friday approved amendments to real estate investment trust (REIT) and infrastructure investment trust (InvIT) rules, giving them more flexibility to raise funds.

The Securities and Exchange Board of India (SEBI) raised the leverage limit for InvITs from 49 per cent to 70 per cent.

It also changed norms for valuation of money market and debt securities by mutual funds in order to make the process fairer and uniform across the industry and safeguard investors from defaults. Experts say the step has been taken in view of the IL&FS crisis.

The changes seek to make valuation practices more reflective of the realisable value of money market and debt securities with residual maturity up to 60 days.

Accordingly, the residual maturity limit for amortisation-based valuation by mutual funds will be reduced from 60 days to 30 days.

The threshold maintained between reference price and valuation price would be plus or minus 0.025 per cent, while the reference price would be taken as the security level price given by valuation agencies.

According to the Board's decision: "The valuation agencies appointed by the Association of Mutual Funds in India (AMFI) may provide valuation of money market and debt securities rated below investment grade."

The SEBI also approved lowering of fees for brokers and exchanges, as well as granting of permanent registration to custodians, instead of periodical renewal every year.

The SEBI meeting also okayed a 33.33 per cent reduction in fees of brokers from Rs 15 per crore of transactions to Rs 10, while the same for agri-commodity derivative transactions would see a sharp 93.33 per cent reduction from Rs 15 to just Re 1.

On REITs and InVITs, the SEBI said the norms now include those relating to minimum allotment and trading lot, and the value of such allotments, among others. The minimum allotment by REITs/InVITs would be made in multiples of a lot, each consisting of 100 units, while the value of such allotment lot would be Rs 1 lakh for InvITs and Rs 50,000 for REITs.

The increase in the limit would be subject to disclosure and compliance requirements, such as the consolidated debt of the InvIT and the project debt having a credit rating of AAA.

The InvIT will need a minimum track record of 6 distributions on a continuous basis, post listing, in the years just preceding the financial year in which the enhanced borrowings are proposed to be made.

For this, the minimum number of investors would be determined by the issuer, including the maximum holding of units by a single investor. The leverage would be determined by the issuer in consultation with investors.

The underlying assets can be completed, under construction or both, while the minimum investment by an investor cannot be less than Rs 1 crore.