Boosting infrastructure: Sebi move to amend holding structure of Infra Investment Trusts hailed

By: | Updated: May 21, 2016 8:42 AM

The latest amendments to the holding structure of Infrastructure Investment Trusts (InvIts) is likely to make the instrument more lucrative for the sponsors of the infrastructure assets to be put under business trust.

Sebi, Sebi News, SPNJ, collective investment schemeStock markets regulator SEBI on Thursday allowed mandatory sponsor holding in InvIT to be reduced to 10% from current requirement of 25%, subject to certain conditions. SEBI also increased the number of sponsors from 3 to 5.

The latest amendments to the holding structure of Infrastructure Investment Trusts (InvIts) is likely to make the instrument more lucrative for the sponsors of the infrastructure assets to be put under business trust.

Stock markets regulator SEBI on Thursday allowed mandatory sponsor holding in InvIT to be reduced to 10% from current requirement of 25%, subject to certain conditions. SEBI also increased the number of sponsors from 3 to 5.

The move has been welcomed by the consultants and banking community as it will enable the owners of the assets to free up more equity which can then be utilised for funding of future infrastructure assets, and off course it brings in more funds into the instrument.

Samir Kanabar, partner, EY, said that the amendments will help in increasing participation from more infrastructure players. “Increasing the number of sponsors from 3 to 5 will enable more non-major infrastructure companies to bring their quality operational assets in a pool and then put them under an InvIT.”

He said that the infrastructure players had made recommendation that assets of 3 sponsors will not lead to enough quality assets that could be put under InvIT, however, 5 would be a good number.

Also, the 25% holding norm was a huge constraint for the project owners, as it was going contrary to the objective of the instrument to provide as a viable exit option for the project owners, say industry experts. Kanabar said, the move will definitely give more liquidity in the hands of the project owners who can then utilise that cash to invest in future projects that they would like to bid for and develop.

Ashish Agarwal, director (infrastructure), Equirus Capital, said, “Reducing sponsor holding to 10% will make room for more secondary investors’ participation and more money coming into the hands of the sponsor, which can then be utilised as equity for future projects”.

This move is a game changer as it now gives companies the wherewithal to monetise marquee income-generating infrastructure and real estate assets.

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