Infra investment gets Sebi push

The regulator issues consultation paper on infra investment trusts

The Securities and Exchange Board of India (Sebi) has issued a consultation paper for a separate investment vehicle to channelise investments into infrastructure. Comments have been invited till January 20.

Similar structures are in place in international markets, including Singapore, Hong Kong and America.

Infrastructure investment trusts (InvITs) are being contemplated as a means of channelising savings to meet the infra sector’s estimated capital requirement of Rs 65 lakh crore over the duration of 2012-2017, according to the paper.

Sebi has proposed two possible ways of introducing such structures. One is through the mutual fund route, with the insertion of a separate chapter covering the new entities, through existing MF regulations. The fund would be set up as a trust, which would acquire shares of Special Purpose Vehicles (SPVs) in infra projects, starting with those which have government and private partnership, and later expanded to include other projects.

The sponsor for such a fund would have to be an infra developer or an SPV which has entered into an agreement for the project. The entity would be required to have a minimum stake in the infrastructure investment vehicle. The portfolio should include a mix of projects in an early stage of development and others generating cash flows, says the paper. Initially, only projects in one sector can be bundled; for example, a structure may invest in only road projects.

The trusts would have to distribute at least 90 per cent of  income after tax to investors. Units of the fund can also be listed, according to the paper. “While listing is not mandatory, listing of MF units will allow certain taxation benefits,” it said.  “Mutual fund is an established structure and including InvITs as MFs would enable easy association of investors with the vehicle,” it added.

Alternatively, Sebi is also contemplating a separate framework, distinct from the MF regulations, for such investment vehicles.

There would be two categories, one of which would invest in multiple infrastructure projects and the other in only one-year revenue generating ones. The first category would only be able to raise money from institutional investors, with a minimum size of Rs 5 crore. The second category would have a minimum size of Rs 10 lakh and could raise capital from any investor.
The regulator has invited comments till January 20, 2014.