Capital market regulator the Securities and Exchange Board of India (Sebi) on Thursday offered to lower sponsors’ mandatory holding to 10% and allowed greater operational flexibility, making it easier for infrastructure projects to raise funds from capital markets.
Under the amendments to the proposed norms for Infrastructure Investment Trusts (InvITs), an investment product for arranging long-term financing for infrastructure projects, Sebi has suggested allowing such trusts to invest in two-level SPV (special purpose vehicle) structure.
Currently, InvITs can either hold infrastructure assets either directly or through an SPV, in which such a trust holds control.
It has been now proposed to allow InvITs to invest in a holding company which would further invest in other SPVs.
Sebi has requested public comments till September 6 and will take a final decision after looking into the feedback from all stakeholders. Under current norms, sponsors of an InvIT are required to hold minimum 25% stake for at least three years. The amendments may address concerns related to tax inefficiencies, lender considerations, difficulties in proposes relaxed norms for infra investment trusts exit for financial investors, which may arise if a holding company investment is not allowed.
The changes have been proposed to make it more attractive for the sponsors to float such vehicles.Sebi notified InvITs regulations last September, thereby providing a regulatory framework for registration and regulation of such trusts in the country.
Last week, Mumbai-based IRB Infrastructure Developers announced its intention to form an InvIT under the proposed Sebi regulations and acknowledged that the easy tax structure offered by the government was conducive for InvITs.
IRB became the first company to publicly express its intentions to float an InvIT after the BJP-led government exempted Minimum Alternate Tax (MAT) from the structure where shares of an SPV are transferred into the trust, while levying of Dividend Distribution Tax (DDT) on the distributed income from the trust to the unit holders intact.
“We feel there is enough clarity now on the taxation on InvIT instrument and we plan to float InvIT by the end of March 2016,” Virendra D Mhaiskar, CMD, IRB Infrastructure Developers had told FE last week post its first quarter results.