An InvIT releases capital from infrastructure assets, but its funding needs continue after the initial portfolio is transferred. Further acquisitions, asset improvements, maintenance and refinancing require access to fresh capital, while distribution obligations limit the cash retained within the trust.

SEBI has developed this funding framework through amendments to the InvIT Regulations and circulars that translate those permissions into issue procedures, pricing rules and reporting requirements. This article traces the development of unit fundraising and debt funding separately, highlights the main changes and examines the policy direction they reveal. The central trend is greater access and flexibility, accompanied by more specific safeguards and accountability.

1. Fundraising through units

The original regulations already recognised subsequent unit-issue routes. Later reforms made them more usable by widening investor access, specifying transaction procedures and addressing pricing and execution constraints. The table combines regulatory amendments with material circular-based developments. Historical entries explain the evolution; operative requirements must be read with subsequent amendments and consolidations.

Highlights of the unit funding reforms

The circulars filled the gap between permission to issue units and the steps needed to complete an issue. Public-offer and private-placement documentation, rights-issue procedures, UPI applications and shorter listing timelines progressively reduced execution friction. Preferential-issue and institutional-placement refinements addressed pricing, sponsor participation and lock-in, rather than creating fresh fundraising routes each time.

Investor access widened alongside these procedural changes. Lower public-offer entry thresholds and a broader strategic-investor category expanded the potential subscriber base. Private-to-public conversion provided another route to public capital. Subordinate units addressed acquisition consideration and valuation gaps, rather than bringing fresh cash into the trust. DRs represent a further channel for foreign participation; consultation or Board approval must be distinguished from final operational requirements.

What the unit funding trend shows

The direction is towards repeat access to capital across the life of an InvIT. SEBI has progressively adapted issue procedures to different investor groups and transaction situations. NAV-linked pricing for privately placed InvITs and the conversion reforms show that the framework is also responding to differences in liquidity and market access.

Greater flexibility has been paired with pricing benchmarks, disclosure, valuation and approval conditions. The development is therefore broader than adding instruments: it is building a more workable unit market in which an InvIT can return for capital and investors can assess the terms on which they participate.

2. Debt funding

SEBI expressly permitted listed InvITs to issue listed debt securities in 2017. Debt funding also covers eligible loans from banks, financial institutions, NBFCs and other lenders, as well as overseas borrowing where permitted, at trust, HoldCo or SPV level. The table traces changes affecting consolidated capacity, debt-market access, permitted uses and debt-related reporting. Lender rules and FEMA conditions continue to apply separately.

Highlights of the debt funding reforms

The main expansion was the conditional increase in the borrowing ceiling from 49% to 70% in 2019. SEBI’s Board memorandum recognised that distribution obligations left limited retained cash for acquisitions and that the existing cap constrained growth. Listed debt securities and commercial paper added market-based channels, while the consolidated framework continued to capture borrowing across the trust and underlying entities.

Later changes focused on the quality and use of debt capacity. The 2023 cash-equivalent and denominator clarifications refined leverage measurement; netting cash against borrowings was not first introduced that year. The 2025 issuer-rating and distribution-record changes clarified eligibility for higher borrowing, while hedging permission addressed interest-rate risk on existing debt.

The 2026 changes recognised expenditure over an asset’s life, including specified enhancement, major maintenance and eligible refinancing. The August NDCF circular connected debt-funded road maintenance with distribution calculations, subject to approvals, auditor certification and disclosure of future effects. This is not a general permission to distribute borrowed money.

What the debt funding trend shows

The direction has moved from a borrowing ceiling towards a more complete framework covering how debt is raised, measured, deployed and monitored. Capacity has expanded, but higher leverage still depends on eligibility, approvals and specified uses. Reporting and valuation requirements make the associated obligations more visible.

The later reforms also recognise that infrastructure financing continues after acquisition. Maintaining and improving an asset, managing interest-rate exposure and refinancing eligible liabilities are part of that cycle. SEBI’s approach accommodates these needs while requiring the finance team to account for their effect on consolidated leverage and future cash available for distribution.

Conclusion

Drawing from the development of the equity market, SEBI’s next focus for InvIT units may increasingly be on making existing fundraising routes quicker and more effective, widening investor participation and improving liquidity and price discovery. Further alignment with equity-market practices could support this progress, while retaining safeguards suited to the InvIT structure.

For debt, the next stage may focus on easier repeat issuance, better access to longer-term funding and greater visibility over repayment obligations and their impact on distributions.

Source references

The tables combine regulatory amendments with relevant fundraising circulars, including historical requirements subsequently amended or consolidated. General governance circulars are excluded unless materially connected with fundraising. The 2026 DR entry describes framework development rather than assuming operational availability.

1. SEBI InvIT Regulations and amendment footnotes
2. SEBI InvIT Master Circular dated 11 July 2025 Chapters 2 to 16 and 21
3. Institutional-placement pricing circular dated 8 February 2024
4. Financial disclosure review dated 7 May 2025
5. Private-to-public conversion review dated 8 August 2025
6. Permitted borrowing uses circular dated 15 May 2026
7. NDCF circular dated 14 August 2026

The article is written by Ms. CS Rutuja M Umadikar

The post The Evolution of InvIT Fundraising Through Units and Debt first appeared on MMJC.

An InvIT may hold its infrastructure investments in two ways. It may directly hold an SPV which owns the infrastructure project, or it may invest through an intermediate Holding Company (“HoldCo”), which in turn holds one or more underlying SPVs.

The HoldCo layer, however, was not part of the original InvIT framework introduced in 2014. It was subsequently added after market participants represented to SEBI that the original structure did not fully accommodate the manner in which infrastructure businesses were actually organised in India. The introduction of the HoldCo therefore represents an important stage in the evolution of the InvIT framework.

This article looks at why the HoldCo layer became necessary, the concerns considered by SEBI while allowing it, how the structure is being used by InvITs today and, how the tax framework has adapted to this additional layer

How did the HoldCo layer come into the picture?

Under the original InvIT Regulations, an SPV was required to hold at least 90% of its assets directly in infrastructure projects and was not permitted to invest in another SPV. Thus, the structure originally contemplated was broadly:

InvIT
↓
SPV
↓
Infrastructure Project

After the Regulations were notified, market participants represented to SEBI that this structure did not always match the manner in which infrastructure businesses were actually organised.

SEBI’s consultation paper dated August 20, 2015, recorded that infrastructure assets in India were commonly held through different project-specific SPVs, with promoters often creating one or more holding companies above these SPVs. In some cases, separate Holdco were also used for different categories of projects, such as operational and under-construction assets. Market participants therefore requested that an InvIT should be permitted to acquire the infrastructure portfolio through the existing Holdco instead of necessarily acquiring each SPV directly.

The industry identified the following practical reasons for permitting such a structure:

• Restrictions under concession agreements: In infrastructure projects, particularly PPP projects, the concession agreement may restrict a direct change in control of the project SPV. If the InvIT were required to directly acquire the SPV, such a restriction could make the transaction difficult or even prevent it. A transfer at the Holdco level could, depending upon the contractual terms, allow the existing project SPV structure to continue without disturbing the concession arrangement.

• Consent requirements under project contracts: Certain project agreements, such as Power Purchase Agreements in the power sector, may require prior consent where there is a direct change in control of the project SPV. Obtaining such consents for several SPVs could make the InvIT transaction more time-consuming and operationally difficult. Retaining the existing Holdco–SPV structure could reduce the need for restructuring each project company separately.

• Existing lender security over SPV shares: Infrastructure projects are commonly financed on a project-finance basis, under which lenders may have a pledge over the shares of the project SPV. If the InvIT were to directly hold those shares, the InvIT’s investment itself could become subject to such lender security. Market participants therefore considered it preferable in some cases to preserve the lender security at the existing HoldCo–SPV level rather than bringing it directly onto the InvIT’s holding.

• Tax, financing and investor-exit considerations: Market participants also pointed to possible tax inefficiencies, lender-related issues and difficulties in providing an exit to existing financial investors if the existing HoldCo could not be retained. Requiring every portfolio to be reorganised into a direct InvIT–SPV structure could therefore involve both transaction costs and commercial complications.

Thus, the request for a HoldCo was not simply a request to permit another corporate layer. The broader concern was that the InvIT Regulations should be capable of accommodating existing infrastructure ownership and financing structures without requiring unnecessary restructuring of the underlying projects

How did SEBI’s original HoldCo proposal change after consultation?

When SEBI first proposed the HoldCo structure in August 2015, it sought to permit one additional layer between the InvIT and the underlying SPVs, but subject to conditions intended to preserve the InvIT’s control over the infrastructure assets. Comments received during the consultation process led SEBI to modify some of these conditions before the HoldCo framework was finally introduced. The important changes are summarised below:

Yes. The content can be retained while cutting repetition and making each cell more direct.

The comments received on SEBI’s original proposal show that the challenge was two-sided. On one hand, the proposed HoldCo had to be flexible enough to accommodate existing infrastructure structures. For this reason, the final framework moved away from treating the HoldCo merely as a passive entity holding SPVs and allowed it to directly hold infrastructure projects and undertake activities pertaining or incidental to such holdings. The distribution requirement was also modified so that the HoldCo could retain a limited portion of cash generated from its own activities, while cash received from underlying SPVs continued to be required to flow entirely upwards to the InvIT.

At the same time, allowing an additional layer also increased the need for control and oversight. Therefore, while greater flexibility was given at the HoldCo level, the governance requirements were strengthened—for example, the original requirement of having only one authorised representative on the board of an underlying SPV was replaced with a requirement for majority board representation. The final framework therefore represented a balance between commercial flexibility on one side and control, governance and cash-flow protection on the other.

How is the HoldCo structure being used today?

The HoldCo has now been part of the InvIT Regulations for almost a decade. However, market practice shows that it has not become the default structure for every InvIT.

SEBI’s register presently contains 27 registered InvITs. A review of the latest publicly available structures identified six InvITs presently using a disclosed HoldCo layer. Securities and Exchange Board of India

This table tells us something interesting. The HoldCo is not merely an additional layer used by every InvIT. Its utility becomes more visible where a portfolio contains a number of project-specific entities which can be held through an intermediate corporate structure. Citius and IndiGrid are good examples of this use.

Importantly, an InvIT does not have to choose exclusively between a direct-SPV structure and a HoldCo structure. Both can exist within the same InvIT.

Sustainable Energy Infra Trust (“SEIT”) provides a good example of an InvIT using both structures at the same time. SEIT directly holds two SPVs—Emergent Solren Private Limited and Mega Suryaurja Private Limited. In addition, SEIT directly holds Megasolis Renewables Private Limited, which functions as the HoldCo. Megasolis Renewables, in turn, holds three underlying SPVs—Astra Solren Private Limited, Neo Solren Private Limited and Brightsolar Renewable Energy Private Limited. Thus, in the same InvIT structure, some project SPVs are held directly by SEIT, while another group of project SPVs is held indirectly through the HoldCo, Megasolis Renewables

Its investment structure can therefore broadly be represented as:

SEIT

Direct route:

→ Emergent Solren

→ Mega Suryaurja

HoldCo route:

→ Megasolis Renewables

    ↓

    Astra Solren

    Neo Solren

    Brightsolar Renewable Energy

This shows that the HoldCo is not necessarily an alternative to the direct-SPV structure. It can operate alongside direct holdings within the same InvIT, depending upon the manner in which individual assets or groups of assets are structured.

Market practice therefore suggests that the HoldCo is being used as a flexibility mechanism rather than a default layer. This is broadly consistent with the reason for its introduction—the Regulations permit the InvIT to retain or accommodate an intermediate holding structure where the underlying commercial structure requires it.

The tax angle – did tax law also adapt to the HoldCo?

Tax was one of the issues SEBI itself identified when the HoldCo structure was being considered. In 2016, the tax framework had largely been designed around a single SPV → Business Trust structure. SEBI specifically noted that adding another corporate layer could have tax implications because the then-existing dividend distribution tax concessions applied to distributions by the SPV to the business trust.

The position subsequently became more accommodating. With effect from 2020, Dividend Distribution Tax was abolished and section 80M of the Income-tax Act, 1961 provided a deduction for inter-corporate dividends to the extent the receiving domestic company redistributed the dividend within the prescribed period. This helped reduce the cascading tax effect where dividend moved SPV → HoldCo → InvIT. The Income-tax Act, 2025, applicable from April 1, 2026, continues this principle through section 148, while section 223 read with Schedule V continues the special business-trust framework for qualifying income received from an SPV. Etds

The framework was further changed in August 2026 so that the exemption of qualifying dividend in the hands of a business-trust unitholder is no longer dependent on whether the SPV has opted for the concessional corporate tax regime under section 200.

Thus, tax law has over time reduced some of the tax friction caused by an additional corporate layer, particularly for dividend flows. However, it has not created a separate tax pass-through merely because an entity is called a “HoldCo” under the InvIT Regulations. The nature of the income and the entities through which it moves therefore continue to matter.

Conclusion

The introduction of the HoldCo layer shows how the InvIT framework has developed in response to practical market requirements. The original Regulations contemplated a relatively direct relationship between the InvIT and the project SPV. However, existing infrastructure businesses were often already organised through holding companies because of concession requirements, financing arrangements, contractual restrictions and other commercial considerations.

SEBI therefore permitted the additional layer, but with safeguards intended to ensure that the InvIT continued to retain control over the underlying SPVs and that cash flows, governance and regulatory oversight were not diluted merely because another entity had been inserted in the structure.

Current market practice also shows that the HoldCo has remained an optional structuring tool rather than becoming the standard InvIT structure. Some InvITs hold several SPVs through HoldCos, some continue to hold SPVs directly and some use both structures simultaneously. The HoldCo framework therefore reflects an attempt to give InvITs structural flexibility while preserving visibility and control over the infrastructure assets ultimately held for the benefit of unitholders.

The article is written by Ms. Rutuja Umadikar

This article is published on the Taxguru link below.

https://taxguru.in/sebi/sebi-invit-borrowing-limits-rbi-bank-lending-conditions.html

The post The HoldCo Layer in InvITs – Why was it introduced and How is it used Today? first appeared on MMJC.

Introduction.

As per the traditional trust law, a trust is an obligation to hold a property of one person (settler of the trust) by other person (trustee), in trust for the benefit of the third person (beneficiary). Therefore, it can be said that the trust model originally aimed at safekeeping of properties and the rights attached to them.

However, while a trust structure is well suited for holding investments, it does not by itself provide a framework for professionally managing a business. The structure of an Infrastructure Investment Trust (InvIT) has therefore been designed to combine these two requirements. It uses the traditional trust structure for holding infrastructure investments and, at the same time, creates a separate functional structure for professionally managing the InvIT and its underlying infrastructure projects to earn income from them. In this article, we shall understand how these two aspects come together in the structure of an InvIT.

2 Facets of InvIT structure

Although an InvIT is structured as a business trust, it retains the basic features of a trust: there is a settlor/sponsor, a trustee, beneficiaries in the form of unitholders and property held in trust for their benefit. However, an InvIT also needs a framework for managing investments and operating the underlying infrastructure projects.

Accordingly, the structure of an InvIT can broadly be understood from two perspectives—its investment structure, which explains how the infrastructure assets are held, and its functional structure, which explains how the InvIT and its underlying assets are managed and supervised

Investment structure

An InvIT, as SEBI calls it, is a pooled investment vehicle. It pools money from investors through issue of units, buys an infrastructure or real estate project from a developer and holds it through a special purpose vehicle (SPV), manages that project through Investment manager in order to earn income from it, and then distributes the income in the form of distributions to the investors from whom it had collected money.

For example, assume that ABC Ltd. owns an infrastructure project through a special purpose vehicle, SPV Ltd. ABC Ltd. sets up ABC InvIT and transfers the requisite shareholding and control in SPV Ltd. to the InvIT. Since SPV Ltd. continues to hold the infrastructure project, the acquisition of SPV Ltd. brings the underlying project within the investment structure of ABC InvIT.

While settling the trust as InvIT, ABC Ltd. also appoints PQR Ltd. as the Trustee of ABC InvIT through trust deed forming the trust. The InvIT thereafter raises funds from investors through the issue of units and deploys such funds towards acquisition of the SPV. Income generated from the underlying infrastructure project ultimately flows through the InvIT structure for distribution to the unitholders

In this structure, ABC Ltd., which sets up the InvIT, acts as the settlor and is referred to as the Sponsor under the InvIT Regulations. PQR Ltd. acts as the Trustee and holds the assets of the InvIT (acquired SPV) in trust for the benefit of its beneficiaries. The investors who hold units of ABC InvIT are its unitholders and constitute the beneficiaries of the trust

Following can be the pictorial representation of the investment structure.

Unitholders including sponsor

↓

InvIT

↓

SPV

↓

Infrastructure Project

HoldCo layer

During 2015–16, market participants represented to SEBI that the InvIT framework should permit an additional layer between the InvIT and the underlying SPVs. The representation reflected existing infrastructure ownership structures in which project SPVs were often held through an intermediate holding company. Following public consultation and consideration of the implications under other applicable laws, SEBI introduced the concept of a HoldCo into the InvIT framework.

Post insertion of the HoldCo layer, in our above example, the structure will be like, ABC InvIT holds majority shares and controlling interest in HoldCo ltd and HoldCo ltd in turn holds the majority shares and controlling interest in SPV ltd and SPV ltd holds the actual infrastructure project.

Following is the pictorial representation of InvIT structure having HoldCo layer.

Unitholder including sponsor

↓

InvIT

↓

HoldCo

↓ ↓ ↓

SPV 1 | SPV 2 | SPV 3

The HoldCo layer is optional, and its use depends upon the structure of the relevant InvIT and its underlying assets. A HoldCo may, for instance, be used as an intermediate entity for holding multiple project SPVs, particularly where the infrastructure portfolio already follows such a corporate structure or where commercial, financing or contractual considerations make such a structure appropriate.

Functional structure

While the trust structure is well suited for holding assets for the benefit of beneficiaries, it does not possess the same internal managerial framework as a company. For example, a trust does not ordinarily have a board of directors or a comparable corporate management structure responsible for conducting its business.

 in order to solve this difficulty, SEBI has designed through InvIT regulations, a concept called parties to InvIT. These parties are professionally managed companies who take care of day-to-day business of the trust and other related matters. Such parties to InvIT include,

• Sponsor,
• Trustee,
• Investment Manager (IM) and
• Project manager (PM)

•  Sponsor: The Sponsor is the person who sets up the InvIT and provides the starting point for creation of the trust structure. In many cases, the Sponsor is also responsible for contributing or facilitating the transfer of the initial infrastructure assets to the InvIT structure.

• Trustee: The Trustee holds the assets of the InvIT in trust for the benefit of the unitholders. It also performs an important oversight function by monitoring the activities of the Investment Manager and ensuring compliance with the requirements applicable to the InvIT.

• Investment Manager: From a functional perspective, the Investment Manager performs a role broadly analogous to the management function performed by a board of directors in a company. It is responsible for managing the affairs of the InvIT and taking decisions relating to investments, acquisitions and other matters, while also ensuring governance and regulatory compliance.

• Project Manager: The Project Manager is responsible for the operation and management of the underlying infrastructure project, rather than for management of the InvIT itself.

Functional Structure through the Lens of the Traditional Trust Model

As per the traditional trust structure, there is no provision for appointment of entities like investment manager or project manager etc. and the duty to look after investment and day-to-day management of trust property is that of the trustee. However, as per section 47 of the Indian Trust Act and regulation 9(3 &4) of InvIT regulations, the trustee has the power to delegate some of its duties subject to conditions and limitations.

If we look at functions of parties to InvIT against functions of trustee under trust Act, it is seen that the trustee’s function of maintaining the trust property, its investment etc. is done by IM and PM in consultation with the trustee and the trustee is expected to oversee all these activities. These functions are assigned to IM and PM by the trustee through Investment management agreement and project management agreement respectively.

As per the InvIT regulations, the trustee appoints the investment manager and deligates its function of managing the trust property to IM. Thereafter IM appoints the PM in consultation with trustee and delegates its function of looking after day-to-day management of project to PM through project management agreement.

Thus, the Investment Manager and Project Manager are additional elements introduced by the InvIT framework to enable a traditional trust structure to function as a professionally managed investment vehicle. Their respective responsibilities arise from the InvIT Regulations as well as the contractual arrangements governing their appointment, with the Trustee continuing to exercise the oversight contemplated under the regulatory framework.

Conclusion

The InvIT framework is therefore a combination of the traditional trust model and a modern business structure. While the investment structure determines how infrastructure assets are held—directly through SPVs or through an intermediate HoldCo—the functional structure distributes the responsibilities of managing and operating those assets among the Trustee, Investment Manager and Project Manager. Together, these two structures enable a trust, which by itself does not have a conventional corporate management framework, to function as a professionally managed investment vehicle.

Among the various elements of this structure, the HoldCo layer is particularly interesting. Unlike the basic Trust–SPV structure, the HoldCo was not contemplated as part of the original InvIT framework and was subsequently introduced by SEBI following representations from market participants. The regulatory evolution of this layer, the reasons behind its introduction and the manner in which it is being used by InvITs today are examined in the next article.

The article is written by

Rutuja Umadikar

This article is published on the Taxguru link below.

https://taxguru.in/sebi/invit-structure-investment-holdco-sponsor-trustee-managers.html

The post Understanding an InvIT: Its Functional and Investment Structure first appeared on MMJC.

Public listing changes the way an InvIT is required to collect, verify and report information. Once an InvIT approaches public investors, financial information, valuations, distributions, borrowings and material developments must be supported by reliable internal processes and timely flow of information from the underlying entities. This requires preparation much before listing. The compliance team must ensure that information originating from the trust, holding companies, SPVs and project teams is complete, consistent and capable of being reported within the applicable timelines.

This article discusses the operational preparedness required before public listing, particularly in relation to financial reporting, valuation and NDCF, borrowings and lender arrangements, and the system for identifying and disclosing material developments

1. Align financial reporting, valuation and distribution processes

The next stage involves bringing the financial information of the trust and its underlying entities into alignment. The compliance team must coordinate with the finance team, auditors and valuers to ensure that information relating to the trust, holding companies and SPVs is complete and consistent.

Chapter 3 of SEBI’s Master Circular prescribes the financial information required in the offer document. Importantly, the nature of financial information differs depending on the public-issue route.

For an initial offer, paragraph 3.2.1 requires disclosure of audited combined financial statements. For a follow-on offer, paragraph 3.2.2 requires audited consolidated financial statements, with the separate audited financial statements made available on the InvIT’s website. These differences must be considered when planning the financial-reporting exercise for an IPO or conversion.

The compliance team must also examine whether acquisitions, disposals or restructuring transactions affect the financial information proposed to be presented. For example, where an InvIT has acquired a material SPV after the latest financial reporting period, the team must assess whether pro forma financial information is required under the applicable offer-document framework.

Valuation and distribution controls

Regulation 21 governs valuation requirements. The compliance team must coordinate with the valuer and finance team to ensure that the required valuation exercises are completed, relevant information is made available and the reports are considered and disclosed in accordance with the applicable requirements.

For example, the valuation of a toll-road asset may rely on traffic projections, concession tenure and other operating assumptions. The compliance team must ensure coordination between the project team, finance team and valuer so that the underlying information is consistent with the information included in the offer document.

The preparation must also cover Net Distributable Cash Flows (NDCF). Regulation 18 governs the applicable distribution requirements, while paragraph 3.19 of SEBI’s Master Circular, as amended, provides the framework for NDCF calculations. The compliance team should coordinate with finance to establish how cash-flow information moves from SPVs and holding companies to the trust, how adjustments are calculated and how distributions are approved and reconciled with the financial statements.

The objective is to ensure that the financial information, valuation reports, distribution records and statements made in the offer document are supported by consistent underlying data.

2. Examine borrowings and lender arrangements

Financial readiness also requires a consolidated review of the borrowings of the trust, holding companies and SPVs. The compliance team must ensure that the borrowings and deferred payments by InvITs are in accordance with Regulation 20, and should coordinate with finance to examine the consolidated leverage position and any approvals or other requirements arising under the applicable borrowing framework.

Similarly, an acquisition financed through borrowing may involve restrictions on distribution of cash flows or creation of further security. These conditions must be examined against the proposed issue structure, utilisation of proceeds and post-listing financing arrangements.

3. Establish a system for identifying and disclosing material information

Public listing requires the InvIT to have a reliable system for identifying developments and making timely disclosures. Regulation 23 of the InvIT Regulations governs disclosures, including the obligation to disclose information having a bearing on the operation or performance of the InvIT. Chapter 4 of SEBI’s Master Circular supplements this framework by prescribing continuous disclosures and compliances.

The compliance team must ensure that information originating at the project, SPV or holding-company level reaches the investment manager in time for assessment and disclosure. For example, an SPV may receive a termination notice from a concessioning authority, experience a major operational disruption or become subject to a significant regulatory proceeding. Such information may initially be available only with the project manager, operations team or local management.

Unless a proper reporting system exists, the compliance team may become aware of the development only after a substantial delay. The disclosure process should therefore clearly establish the responsibility for identifying events, internal reporting timelines, assessment of materiality, approval of disclosures and subsequent updates.

Contractual oversight should also form part of this reporting arrangement. For instance, the legal or operations team should inform the compliance team when a material contract is terminated, a lender invokes a covenant, a concession agreement is materially amended or a contractual dispute results in a notice or order. The compliance team can then assess the disclosure implications under the applicable InvIT framework.

The information-sharing process should extend to sponsor-group entities where developments concerning them are relevant to the InvIT’s applicable disclosure obligations.

Controls over confidential information and market communications must also be examined. Where an InvIT operates a unit-based employee benefit scheme, Regulation 17P specifically applies the SEBI (Prohibition of Insider Trading) Regulations, 2015 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 to the persons and entities specified in that provision.

Before filing, the disclosure system should be tested using practical situations to determine whether the information can actually be identified, escalated, assessed and approved within the applicable timelines.

Conclusion

For a public InvIT, compliance ultimately depends on how reliably and quickly information moves from the trust, holding companies, SPVs and project teams to the investment manager. Financial reporting, valuation, NDCF, borrowings and material-event disclosures may be governed by different requirements, but they all depend on the same underlying information being complete, consistent and available on time.

The compliance team therefore has an important role in bringing together inputs from finance, legal, operations, project teams, valuers, SPVs and holding companies, and ensuring that the internal processes supporting these compliances are properly coordinated.

Building and testing these systems before filing is therefore an important part of preparing an InvIT to operate as a public InvIT

The article is written by Ms. Rutuja M Umadikar.

The post Preparing an InvIT to Operate Like a Public InvIT first appeared on MMJC.

Public listing of an InvIT requires much more than completing the issue process. Before filing the offer document, the InvIT must ensure that its unit structure, disclosures, supporting records and post-listing compliance systems are ready for public-market requirements.

At this stage, the compliance team plays an important role in bringing together information from different functions, verifying the disclosures proposed to be made and ensuring that the InvIT is prepared not only to complete the public issue but also to meet its continuing obligations after listing.

This article discusses the key areas that require attention at this stage, including preparation of the unit structure and public-issue arrangements, verification of the offer document, setting up post-listing compliance systems and testing those systems before filing

1. Prepare the unit structure and public-issue arrangements

Once the underlying legal, financial and governance arrangements have been examined, the compliance team must finalise the matters relating to units and the public issue. This requires reconciliation of unit capital, existing unitholding, depository records and outstanding rights. The proposed issue must also be examined against the applicable conditions concerning public unitholding, offer size, sponsor contribution and lock-in.

For a privately listed InvIT undergoing conversion, the existing unit structure requires particular attention. Under paragraph 14.4 of SEBI’s Master Circular, units proposed to be offered for sale by an existing unitholder must be free from encumbrance or lock-in when the draft offer document is filed. The framework also prescribes restrictions on participation in the issue by specified selling unitholders. For example, where an existing investor proposes to offer its units for sale but those units are pledged in favour of a lender, the compliance team must identify the encumbrance and coordinate the necessary action before filing.

2. Ensure that the offer document is supported by verified information

Under Regulation 10(5) of the InvIT Regulations, the investment manager is required to appoint merchant bankers for the public issue. Chapter 2 of the Master Circular further prescribes the public-issue process and requires the lead merchant banker to submit due-diligence certificates at specified stages. The compliance team must facilitate this exercise by ensuring that information supplied to the merchant bankers and other advisers is accurate, complete and supported by records.

For example, if the offer document contains information regarding the remaining concession period of a road project, the relevant dates must be verified against the concession agreement and subsequent amendments. Similarly, operating data such as traffic, revenue, occupancy or project availability must be reconciled with the records maintained by the underlying entities. Statements relating to acquisitions, future growth, distributions and other material matters must also be supported by the relevant documents and information.

For conversion transactions, Chapter 14 additionally requires disclosures concerning historical distributions and a comparison of actual performance with projections made in the original placement memorandum.

The compliance team must therefore coordinate with the relevant departments to collect, reconcile and verify this information.

The verification exercise should continue throughout the offer process. Any material developments occurring between filing, regulatory review, launch, allotment and listing must be examined to determine whether updates to the offer document or other action are required.

3. Establish post-listing compliance before the listing date

The final stage is to ensure that the InvIT is capable of meeting the obligations that will apply after it becomes publicly listed. Regulation 23, read with Chapter 4 of SEBI’s Master Circular, requires the InvIT to undertake specified periodic and continuous disclosures. The compliance team must therefore establish the necessary reporting arrangements before listing rather than creating them after the issue is completed. These arrangements should cover financial results, annual and half-yearly reports, valuation reports, distributions, unitholding patterns, related-party disclosures, governance reports, borrowing-related disclosures and other applicable filings.

For example, the financial-reporting calendar must allow sufficient time for the finance team to prepare results, auditors to complete their review, the relevant committee and board to consider the information and the compliance team to make the stock-exchange filing. Similarly, the valuation calendar must account for information being collected from the SPVs, the valuer completing the valuation and the investment manager considering the report within the applicable timeline.

Governance-related reporting must also be supported by appropriate records.

For instance, the review of compliance reports by the board of the investment manager under Regulation 26H(3) requires information regarding compliance with applicable laws to be collected from the relevant functions and underlying entities. The compliance team should therefore establish clear reporting responsibilities and internal timelines for each requirement.

Investor-related arrangements must also be made operational, including the registrar and transfer agent, investor grievance mechanism, website disclosures, maintenance of records and procedures relating to distributions and other corporate actions.

For a privately listed InvIT, the team must identify which existing procedures can continue after conversion and which need modification to meet the public InvIT requirements.

For an InvIT undertaking its first public listing, the relevant systems must be established from the beginning.

4. Test the compliance systems before filing

Merely preparing a compliance calendar or adopting policies does not establish whether the systems will function effectively. A trial run of the proposed compliance processes for one or two reporting periods can help identify practical difficulties.

For example, the team can test whether information required for financial reporting reaches the investment manager on time, whether project-level developments are escalated promptly and whether the necessary approvals can be obtained within the prescribed deadlines.

Before approving the offer document, the investment manager and trustee should have a clear view of the compliance readiness of the InvIT, including completed actions, unresolved issues, pending consents and matters requiring further action before listing. This assessment should establish whether the InvIT is ready not only to complete the public issue but also to meet its continuing obligations after listing.

Conclusion

Preparing an InvIT for public listing involves several compliance requirements, but their successful implementation depends on much more than the efforts of the compliance team alone. While the team is responsible for identifying requirements, coordinating implementation and monitoring compliance, successful preparation depends on effective coordination with finance, legal, operations, project managers, SPVs, the investment manager, its board and the trustee.

There is also an important distinction between the public-listing process and the preparation required before it begins. Although the InvIT Regulations and SEBI circulars prescribe the eligibility conditions, approvals, disclosures and procedures for public listing, they do not provide a ready-made approach to identifying and addressing gaps within an individual InvIT. This requires the compliance team’s knowledge of the regulatory framework, understanding of the InvIT’s operations and proactive approach to anticipating issues, resolving them early and establishing appropriate systems.

Thus, while the law prescribes the process for public listing, the InvIT’s readiness depends largely on the knowledge, coordination and proactiveness of its compliance team.

The article is written by Ms. Rutuja M Umadikar.

The post From Offer Document to Listing: Completing Public-Listing Readiness first appeared on MMJC.

The changing market and regulatory environment has made public listing increasingly relevant for InvITs. However, deciding to list and being ready to list are two different things. Before an InvIT begins preparing the offer document, the compliance team must first examine whether its existing structure, historical record and governance arrangements are suitable for a public InvIT.

This first stage of preparedness is important because several issues may require amendments, approvals, consents or rectification before the public-issue process can move ahead.

1. Start by identifying the correct route to public listing:

The first step is to identify the route to public listing, as the preparatory requirements differ for an IPO and conversion of a privately listed InvIT.

For an IPO, eligibility under Regulation 14 of the InvIT Regulations must be assessed, along with the readiness of the asset portfolio, governance structure and financial information.

Whereas, for conversion of a privately listed InvIT, SEBI’s circular dated August 8, 2025 aligns the issue procedure and disclosure requirements with the follow-on-offer framework. In addition, paragraph 14.3 of the Master Circular prescribes additional eligibility conditions relating to asset requirements, historical listing and disclosure compliance, distributions and approval of 75% of unitholders by value. The compliance team must also examine whether existing investor rights, such as preferential rights, veto rights and transfer restrictions, require modification before conversion.

The method of public listing must therefore be decided at the outset, as it determines the scope of the preparatory exercise, approvals, documentation and applicable compliance requirements.

2. Examine whether the existing structure is suitable for a public InvIT:

Once the listing route is identified, the compliance team must examine the existing legal and operational structure of the trust. The review should begin with the trust deed, registration conditions and agreements governing the sponsor, trustee, investment manager and project manager. Regulations 9, 10 and 11 of the InvIT Regulations prescribe the responsibilities of the trustee, investment manager and project manager, respectively. The compliance team must examine whether the agreements among these parties clearly reflect their respective responsibilities and whether the arrangements followed in practice are consistent with those agreements.

The review must then extend to the holding companies, SPVs and underlying infrastructure assets. Regulation 18 prescribes the investment conditions applicable to InvITs, including requirements concerning investments in infrastructure projects through holding companies and SPVs. Accordingly, the compliance team must verify whether the existing ownership structure, control arrangements and rights over the underlying assets satisfy the applicable conditions.

This exercise becomes particularly important where the InvIT has acquired projects subject to contractual restrictions or third-party rights.

Oversight of contractual arrangements:

The compliance team should examine whether the proposed listing has any implications under the material contracts executed by the trust or its underlying entities. For example, a concession agreement may contain restrictions on changes in shareholding or control of the concessionaire SPV. A financing

agreement may require prior lender consent for a change in ownership or creation of additional security. Similarly, a shareholders’ agreement in case of an SPV or HoldCo may provide a minority investor with veto rights over important decisions.

The compliance team must identify such provisions and determine whether the proposed transaction triggers any consent, amendment or approval requirement. Identifying such issues early is important because contractual approvals may require negotiations with lenders, government authorities or other parties and may not be obtainable immediately before filing.

3. Review historical compliance and resolve outstanding issues:

After examining the structure, the compliance team must establish whether the InvIT’s historical records can support the information proposed to be included in the offer document. This requires examining records relating to the trust, holding companies, SPVs and underlying assets. The review should cover historical unit issuances, allotments, transfers, distributions, acquisitions, disposals, borrowings, valuations, regulatory filings and approvals.

For example, where the InvIT has acquired an SPV from its sponsor, the compliance team should verify the acquisition agreement, valuation report, applicable approvals, consideration paid and related disclosures.

Such transactions must also be examined from a related party perspective. Regulation 19 of the InvIT Regulations requires related-party transactions to be undertaken on an arm’s-length basis and in the best interests of unitholders, subject to the applicable approval and disclosure requirements. Accordingly, the compliance team must verify whether historical related-party transactions were properly identified, approved and disclosed.

The review should also cover litigation, show-cause notices, regulatory orders, investor grievances and outstanding defaults. Historical compliance becomes especially important in private-to-public conversion. Under paragraph 14.3 of the Master Circular, the InvIT must satisfy specified conditions relating to its compliance with listing obligations and distributions during the period since listing or the preceding three years, whichever is shorter.

For example, if a privately listed InvIT has received stock-exchange notices for delayed disclosures, the compliance team must examine the nature of the defaults, their status and their implications for conversion eligibility. The framework expressly provides that the imposition of only monetary fines by stock exchanges does not, by itself, make the InvIT ineligible.

Similarly, distribution records should be reconciled with the declared distribution policy, financial statements, unitholder records and actual payment information.

A central data room should be maintained to organise the supporting documents and identify missing records. Any gaps requiring rectification, additional disclosure or regulatory clarification should be identified before the offer-document preparation reaches its final stage.

4. Align the governance structure with public InvIT requirements:

Once the legal and historical position is established, the next step is to examine whether the governance arrangements meet the requirements applicable to the proposed public structure.

Chapter VIB of the InvIT Regulations provides the corporate governance framework for InvITs. Regulation 26G makes specified provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 applicable to InvITs with necessary modifications, while Regulation

26H prescribes additional governance requirements, including requirements relating to the board of directors of the investment manager.

The compliance team must therefore examine the composition of the investment manager’s board, independence requirements, constitution of committees and other applicable governance obligations.

However, governance readiness does not end with appointing directors and constituting committees. The board and its committees must have access to appropriate information and clearly defined responsibilities for matters such as related-party transactions, borrowings, valuations, acquisitions, disposals and distributions.

For example, if the InvIT proposes to acquire a project from its sponsor, the internal process must clearly identify who reviews the proposed transaction, who examines the valuation and related-party implications, which approvals are required and who is responsible for ensuring that the necessary disclosures are made.

Similarly, responsibilities must be clearly divided among the trustee, investment manager, project manager and underlying SPVs.

The reporting and approval arrangements recorded in the trust deed and other agreements must also be consistent with the procedures followed in practice.

Any changes required in board composition, committee structure, delegation of authority or internal policies should be implemented sufficiently before filing so that the revised governance structure is operational when the offer-related documents are considered.

Conclusion:

The first stage of public-listing preparedness is therefore to understand the InvIT as it exists today – its listing route, legal structure, contractual arrangements, historical compliance and governance framework. These are the areas where issues may require time for rectification, consent or restructuring and should therefore be examined before the transaction process advances.

Once this foundation is clear, the compliance team can move to the next stage: ensuring that the InvIT has the financial, reporting and disclosure systems required to operate as a public-market platform.

The article is written by Ms. Rutuja M Umadikar.

The post Preparing an InvIT for Public Listing: Is the Existing Structure Ready? first appeared on MMJC.