Sebi gives norms for compliance with 25% minimum public holding rules

Markets regulator Sebi on Tuesday provided methods such as an offer for-sale mechanism, rights issue and issuance of bonuses to unitholders of REITs and InvITs to achieve compliance with the 25 per cent minimum public holding requirement.

The rule mandates that any listed REIT (Real Estate Investment Trust) or InvIT (infrastructure investment trust), which has public unitholding below 25 per cent, will have to increase its public unitholding to at least 25 per cent within a period of three years from the date of listing of units.

To facilitate REITs and InvITs to achieve minimum public unitholding compliance, Sebi said that managers of these trusts will have to adopt any method suggested by the regulator.

Methods include the issuance of units to the public through an offer document, offer for sale (OFS) of units held by the sponsor, manager and their associates to the public through an offer document and OFS of units through the stock exchange mechanism for compliance with the rule.

In addition, the regulator also provided avenues like rights issues as well as bonus issues to public unitholders, allotment of units under institutional placement and sale of units held by sponsor, manager and their associates in the open market, subject to certain conditions to emerging investment instruments.

Sebi has asked stock exchanges to monitor the methods adopted by REITs and InvITs to increase their public unitholding. In case of non-compliance observed by the bourse with respect to the method, the same will be reported to the regulator on a quarterly basis.

REITs and InvITs are relatively new investment instruments in the Indian context but are extremely popular in global markets.

While a REIT comprises a portfolio of commercial real assets, a major portion of which is already leased out, InvITs comprise a portfolio of infrastructure assets, such as highways and power transmission assets.