A worker cleans the glass of the Securities & Exchange Board of India in Mumbai, India, on Thursday, Oct. 25, 2007. (Photographer: Adeel Halim/Bloomberg News)

SEBI Reduces Minimum Subscription Requirement For REITs, InvITs

The Securities and Exchange Board of India has reduced the minimum subscription requirement as well as defined trading lots for Real Estate Investment Trusts and Infrastructure Investment Trusts.

REITs have to offer their units in lots worth at least Rs 50,000 in initial and follow on public offers. The minimum value of a single lot should be Rs 1 lakh in the case of InvITs.

SEBI on Tuesday came out with guidelines for determination of allotment and trading lot size for REITs and InvITs. Norms pertaining to REITs and InvITs were amended on April 22.

“The said amendments have, inter alia, for publicly offered InvITs and REITs, reduced the minimum subscription requirement and has defined the trading lot in terms of number of units,” the regulator said in a circular. “Further, limits for aggregate consolidated borrowings and deferred payments, net of cash and cash equivalents, have been increased to seventy per cent of the value of the InvIT assets,” the regulator said in a circular.

The amendments are aimed at providing flexibility to the issuers in terms of fundraising and increasing the access of these investment vehicles to investors.

Also read: India’s First REIT Gets Vote of Confidence on Trading Debut

The trading lot has been defined in terms of number of units. Further, leverage limit for InvITs has been increased to 70 percent from current 49 percent.

Such InvITs which are increasing their leverage beyond 49 per cent will have to make additional financial disclosures along with specific details of available asset cover, debt-equity ratio, debt service coverage ratios, interest service coverage ratios and net worth.

While making an initial public offer and follow-on offer, the minimum subscription shall not be less than Rs 1 lakh for InvITs and Rs 50,000 for REITs. Allotment to any investor shall be made in the multiples of a lot.

For initial listing, a trading lot should be of 100 units and during follow-on offer each lot shall consist of such number of units in its trading lot as it had at the time of initial offer.

Currently, in the case of an REIT issue, he minimum subscription from any investor in an initial offer and follow-on public offer is not less than Rs 2 lakh, while the same is Rs 10 lakh in case of InvIT.

The exchanges shall in consultation with the publicly offered InvITs and REITs need to determine the number of units in the trading lot for such REITs, InvITs, within a period of 6 months from date of the circular, SEBI said.