Sebi suggests easing rules for public listing of private InvITs

Market regulator Sebi on Tuesday proposed relaxing various norms to ease the conversion of private listed InvITs into public, including dropping existing lock-in requirements for sponsors and other unitholders.

Currently, when a private-listed Infrastructure Investment Trust (InvIT) converts into a public InvIT, the sponsor is required to hold at least 15% of the units issued to the public and keep them for 18 months, the Securities and Exchange Board of India (Sebi) said.

Any additional units held by the sponsor beyond the minimum contribution are also locked in for one year. The regulator noted that these rules were introduced in 2022 when sponsors were not required to maintain a perpetual minimum unitholding.

However, after amendments to InvIT regulations in August 2023, sponsors and sponsor groups are required to hold a minimum percentage of units permanently post-listing, it added.

As a result, Sebi has proposed to remove the existing lock-in provisions at the time of conversion, stating that sponsors are already required to maintain a long-term commitment to the trust.

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The regulator has also proposed removing the one-year lock-in applicable to non-sponsor unitholders during the conversion.

Sebi also observed that public investors expect units to be freely tradable, and any lock-in could reduce liquidity and discourage participation.

Moreover, institutional investors like mutual funds, pension funds, and insurance firms may face challenges if their units are locked due to their own investment guidelines, as per the draft circular.

The markets watchdog has also suggested simplifying the disclosure process in the offer documents.

Sebi proposed that the public issue of units during conversion should follow the same rules as a follow-on offer, rather than those for an initial public offer.

These proposals are based on feedback from market participants and the recommendations of Sebi’s Hybrid Securities Advisory Committee.

Sebi has invited public comments by July 22 on the proposals.