Companies are seeking more relaxations in the structure of investment trusts even as the Securities and Exchange Board of India (Sebi) undertakes the process of making infrastructure investment trusts (InvITs) more welcoming to retail investors.
On Friday, the capital market regulator published a consultation paper inviting public comments on relaxing leverage and trading rules for InvITs, this after already easing the structure considerably once in 2018 and again earlier this January.
InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects. Sebi introduced InvITs and REITs (real estate investment trusts) in the Indian market in 2014. While InvITs have seen three large public issues so far, the launch of the country’s first REIT is still pending. In order to encourage market participation and liquidity in the instruments, Friday’s consultation paper proposes that the leverage limit for InvITs should be increased from existing 49% to 70%.
While the minimum subscription amount for an investor in an initial public offering and follow-on offer of an InvIT is ₹10 lakh and the minimum trading lot is ₹5 lakh, the paper proposes reducing this to ₹15,000-20,000 each for a minimum subscription of one lot (100 units). After initial listing, the trading lot should also be in multiples of 100 units.
While these proposals indicate that Sebi is willing to include retail investors now within the investor community for InvITs, the recommendations still fall short of what the industry has been asking for.
A retired official, who was involved in the latest round of consultations with Sebi, said: “If you look at the performance of the infrastructure index over the past year, InvITs have performed better than the index as a whole, even if you exclude the dividend that the InvIT has paid out and only consider the unit’s price performance."
Over the past 12 months, BSE Infrastructure index was down 25%, while two listed InvITs performed better.