The Securities and Exchange Board of India (“SEBI”) vide its circular dated November 4, 2020 (“Circular”) has provided guidelines for raising of funds by an unlisted infrastructure investment trust (“InvIT”) through rights issue of units.
The key provisions of the guidelines are as follows:
a) Rights Issue:
Rights issue will mean an offer of units by an unlisted InvIT to the unit holders of the InvIT, as on the record date fixed for the said purpose.
b) Conditions for issuance:
An InvIT cannot make a rights issue of units unless the following conditions are satisfied:
i. A resolution of the board of directors of the investment manager approving the rights issue and determining the record date has been passed.
ii. Units of the same class, which are proposed to be allotted, are already issued by the InvIT.
iii. None of the respective promoters/ partners/ directors of the sponsor(s)/ investment manager/ trustee of the InvIT, is a fugitive economic offender declared under section 12 of the Fugitive Economic Offenders Act, 2018.
iv. None of the respective promoters/ partners/ directors of the sponsor(s)/ investment manager or trustee of the InvIT:
a. is debarred from accessing the securities market by SEBI;
b. is a promoter, director or person in control of any other company /sponsor / investment manager / trustee of any other InvIT which is debarred from accessing the capital market under any order or directions made by SEBI.
c) Underwriting:
If the InvIT proposes to have the issue underwritten, it can appoint underwriters in accordance with the SEBI (Underwriters) Regulations, 1993.
d) Letter of Offer:
The investment manager, on behalf of the InvIT, will have to: (a) file offer letter with SEBI, at least 5 (five) days prior to opening of the issue; and (b) carry out the obligations relating to the issue.
i. Investment manager is required to ensure that the disclosures made in the offer letter contain material, true, correct and adequate disclosures and are in accordance with the SEBI (Infrastructure Investment Trusts) Regulations, 2014 and guidelines/ circulars issued thereunder.
ii. The offer letter should contain all disclosures as specified in Annexure I of the Circular and has be furnished to SEBI in a soft copy.
e) Application:
The investment manager will prepare the application form for the issue and make arrangements for distribution of the application form along with the offer letter to all unit holders as on the record date, at least 5 (five) days prior to the opening of the issue.
f) Pricing of Units:
Issue price will be determined by the investment manager before determining the record date and the same will be disclosed under the offer letter.
g) Timelines:
The issue shall open within 3 (three) months from the record date and be kept open for at least 3 (three) working days but not more than 15 (fifteen) working days.
h) Manner of issuance of units:
i. The units will be allotted in demat form only.
ii. The rights entitlements shall be credited to the demat account of the unitholders before the date of opening of the issue.
iii. The rights entitlements shall include a right exercisable by the person concerned to renounce the units offered to him/her or any of them in favour of any other person and offer letter and the notice sent to the unitholders shall contain a statement to this effect.
i) Allotment:
i. The minimum allotment to any investor shall be INR 1 crore.
ii. Allotment will be made in the following manner:
a. full allotment to those eligible unitholders who have applied for their rights entitlement either in full or in part and also to the renouncee(s), who have applied for the units renounced in their favour, in full or in part, as adjusted for fractional entitlement.
b. allotment to eligible unitholders who having applied for the units in full to the extent of their rights entitlement and have also applied for additional units shall be made as far as possible on an equitable basis, having due regard to the number of units held by them on the record date, provided there is an undersubscribed portion after making allotment in (a) above.
c. allotment to the renouncee(s), who having applied for the units renounced in their favour and also applied for additional units, provided there is an undersubscribed portion after making full allotment specified in (a) and (b) above. The allotment of such additional units may be made on a proportionate basis.
d. allotment to the underwriter appointed for the issue, if any, at the discretion of the board of directors of the investment manager, subject to disclosure in the offer letter as applicable.
j) Restriction on further capital issues:
i. The InvIT shall not make any further issue of units in any manner during the period between the date of filing the offer letter with SEBI and the allotment of the units offered through the offer letter.
ii. Allotment report shall be filed with SEBI by the InvIT, providing details of the allottees and allotment made, within 15 (fifteen) days of the issue closing date.
Please find a copy of the Circular here.
This update has been contributed by Aastha (Partner) and Swaraj Narula (Associate).
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