For increasing the drawing capacity of REITs and InvITs, market authority, the Securities and Exchange Board of India (SEBI) has permitted key investors such as registered NBFCs and global multilateral monetary establishments to invest a maximum of 25% of the overall proposed measure of similar trusts.
SEBI’s notice states, “The strategic investor(s) shall, either jointly or severally, invest not less than 5 per cent and not more than 25 per cent of the total offer size,”
The units consented by strategic investors, according to the component subscription accord, will be hard-shelled for 180 days beginning the date on which it was listed in the public issue.
Additionally, SEBI has deployed operational configurations necessary for strategic investors to be part of (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts).
According to regulations, the manager in place of the InvIT/REIT, will be required to get into a bond unit subscription contract with the key investor, who proposes to invest in the public issue of these types of trusts.
The outline offer deed would reveal information pertaining to the unit subscription contract. This includes the names of each key investor, number of units estimated to be subscribed, the investment figure and intended subscription price per unit.
The subscription price per unit, outstanding against the key investor would be fixed in the unit subscription contract and the whole subscription price would be deposited in a special escrow account before the public issue is unfolded.
The price at which has been assented by the strategic investor at which to buy the units of the corresponding trusts should not be lower than the issue price set in the public issue.
In the event of the price being decided in the public issue being higher than the price at which the allotment is to be made to strategic investor, such investor would reap the extra amount in two working days of the price ascertained in the public issue.
The note by SEBI also states, “The unit subscription agreement shall not be terminated except in the event the issue fails to collect minimum subscription”.
The authority had announced REITs and InvITs Regulations in 2014, permitting the putting together and registering of such trusts that are very prominent in a few progressive markets.
Nevertheless, just two InvITs – IRB InvIT Fund and Indiagrid Trust – have been included in the listing of stock exchanges till now and not even one REIT is part of the national list.
In spite of a variety of previous abatements, listings have not occurred as they have not succeeded in attracting investors.
In December 2017, SEBI had declared easier standards to let these trusts put together funds through the issue of debt securities.
Nonetheless, if the price declared in the public issue is lesser in comparison to the price at which the allotment is to be made to key investor, the additional amount will not be compensated to such investor. Moreover, the key investor would be allotted at the price that was mutually fixed for it to be made part of the unit subscription agreement.