SEBI Tightens Rules for Private InvITs Switching to Public

India’s market regulator SEBI has changed the rules for private listed Infrastructure Investment Trusts (InvITs) that want to become public. The new guidelines apply right away and are meant to make the process more straightforward and transparent.

Sponsor Holding Rules Made Stricter

Under the updated rules, sponsors and their related companies must meet minimum unit-holding requirements even after the InvIT goes public. These holdings will also be locked in for a fixed period, as per existing norms. The move is designed to make sure sponsors stay invested and committed, which helps protect public investors during the transition.

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Offer Process Now Matches FPO Norms

SEBI has also made it clear that any public offering during the conversion will follow rules similar to a follow-on public offering (FPO), not an initial one. That means InvITs converting from private to public must meet the same standards as companies already listed and looking to raise more money. This ensures consistent disclosures and processes across the board.

What Prompted These Changes

The revised rules came after SEBI consulted its Hybrid Securities Advisory Committee and gathered feedback from industry players. Many felt there was a lack of clarity in how private InvITs should go public. By addressing this, SEBI hopes to reduce confusion and bring these trust structures more in line with the rest of the market.

To help spread the word, SEBI has asked stock exchanges and the Bharat InvITs Association to publish these rules on their websites. This makes it easier for sponsors, investors, and other market participants to access the information.

Rationalised Disclosure Requirements for Conversion-related Public Issues

• Current Regulatory Regime: Once a private InvIT converts to public status, the units offered in the conversion are currently treated not only as initial public offerings but also must comply with the disclosure requirements under Chapter 2 of the Master Circular. These disclosures are tailored to first-time investors in public markets.
• Proposed Change: The Circular recommends aligning disclosure obligations for conversion-related offers with those applicable to follow-on public offers, rather than treating them as initial public offerings.
• Benefits: This would streamline compliance, reduce regulatory costs, and shorten time-to-market. It ensures material transparency without overburdening issuers or overwhelming investors with repetitive information.
• Conclusion

Conclusion

These updates aim to bring more discipline and transparency to InvITs, shifting from private to public. By setting clearer rules around sponsor ownership and treating conversions like follow-on offers, SEBI is trying to make the process safer and more predictable for investors.