Sebi plans to relax Investment Trust rules to draw business houses

It plans to remove restriction on SPV to invest in other SPVs, thus allowing InvIT to invest in a holding company

With Infrastructure Investment Trusts (InvITs) failing to catch due attention, markets watchdog Sebi plans to ease rules, including by reducing mandatory sponsor holding to 10%.

The Securities and Exchange Board of India (Sebi), in 2014, had introduced InvITs -- an investment vehicle which would enable promoters to monetise completed assets -- to make it easier to raise funds for infrastructure projects.

However, InvITs have failed to garner due attention from business houses in the country.

Now, the regulator plans to revamp InvITs regulations after receiving recommendations from the industry and may bring in a consultation paper proposing amendments to InvITs regulations, sources said.

The issue in this regard is likely to be discussed at Sebi's board meeting this week.

Under the proposal, Sebi may allow InvITs to invest in two-level SPV (special purpose vehicle).

The regulator plans to remove the restriction on the SPV to invest in other SPVs, thus allowing InvIT to invest in a holding company which subsequently holds stake in SPVs.

Currently, InvIT holds a controlling stake in SPVs that do not invest in other SPVs.

Besides, Sebi is considering reducing the mandatory sponsor holding in InvIT to 10% of the total units of such units on a post-issue basis for a period of three years, from the current requirement of 25%.

The current requirement may limit monetisation for sponsors and reduce release of capital for them. Further, in certain circumstances, it may lead to sponsors putting money out of their own pocket in the InvIT to maintain the required 25% stake.

The regulator also plans to increase the number of sponsors to five, from the current requirement of three.