Sebi issues norms for issuance of debt securities by REITs, InvITs

Market regulator Sebi on Friday released guidelines for issuance of debt securities by REITs and InvITs, wherein they need a registered debenture trustee, along with financial disclosure to the stock exchanges.

The regulator, in December, had allowed these trusts to raise funds by issuing debt securities in order to make them attractive to investors.

For issuance of debt securities,"the REIT (Real Estate Investment Trusts) or InvIT (Infrastructure Investment Trusts) shall appoint one or more debenture trustee registered with Sebi," the regulator said in a circular.

This will be applicable provided a trustee of the REIT (Real Estate Investment Trust) or InvIT (Infrastructure Investment Trusts) is not eligible to be appointed as debenture trustee to such issuance of debt securities, it added.

"Any secured debt securities issued by REITs/InvITs shall be secured by the creation of a charge on the assets of the REIT/InvIT or holding company or SPV (special purpose vehicle), having a value which is sufficient for the repayment of the amount of such debt securities and interest thereon," the circular said.

In addition to financial disclosures, Sebi said that such trusts -- which have listed their debt securities -- need to disclose the asset cover available, net worth, debt-equity ratio, debt service coverage ratio and interest service coverage ratio.

Modified opinions in audit reports, having a bearing on the interest payment or redemption or principal repayment capacity of such trusts, need to be "appropriately and adequately addressed" by the board of the manager while publishing the accounts.

Sebi has asked trusts to submit the half-yearly financial results to the stock exchanges along with a statement indicating material deviations, if any, in the use of proceeds of issue of debt securities from the objects stated in the offer document on a half-yearly basis.

The regulator had notified REITs and InvITs regulations in 2014, allowing setting up and listing of such trusts which are very popular in some advanced markets.

However, only two InvITs - IRB InvIT Fund and Indiagrid Trust - have got listed on stock exchanges so far and not a single REIT has been listed in the country.

Despite various earlier relaxations, listings have not taken place as they have failed to attract investors.