rights issue by unlisted InvITs

SEBI circular dated 4th November, 2020 laying down guidelines for issue of rights units by unlisted infrastructure investment trust (InvIT).

Chapter VIA of the of SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations) provides the framework for private placement of units by InvITs which are not eligible to be listed. In order to enable unlisted InvITs to raise further funds, it has been decided to provide a mechanism for raising of funds by unlisted InvITs through rights
issue of units. For the purpose of this circular “rights issue” shall 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. The guidelines in respect of a rights issue of units by an unlisted InvIT are given below.

  1. Conditions for issuance
    1.1.No InvIT shall make a rights issue of units unless the following conditions are satisfied:
    1.1.1. A resolution of the board of directors of the investment manager approving the rights issue of units and determining the record date has been passed.
    1.1.2. Units of the same class, which are proposed to be allotted are already issued by the InvIT.
    1.1.3. None of the respective promoters or partners or directors of the sponsor(s) or investment manager or trustee of the InvIT is a fugitive economic offender declared under section 12 of the Fugitive Economic Offenders Act, 2018 (17 of 2018).
    1.1.4. None of the respective promoters or partners or directors of the sponsor(s) or investment manager or trustee of the InvIT
    (a) is debarred from accessing the securities market by the Board;
    (b) is a promoter, director or person in control of any other company or a
    sponsor, investment manager or trustee of any other InvIT which is
    debarred from accessing the capital market under any order or
    directions made by the Board;
  2. Underwriting
    2.1. If the InvIT desires to have the issue underwritten, it may appoint underwriters in accordance with the Securities and Exchange Board of India (Underwriters) Regulations, 1993.
  3. Letter of Offer
    3.1. The investment manager, on behalf of the InvIT shall file a letter of offer with the Board at least 5 days prior to opening of the issue
    3.2. The investment manager, on behalf of the InvIT, shall carry out the obligations relating to the issue.
    3.3. The investment manager shall ensure that disclosures made in the letter of offer contains material, true, correct and adequate disclosures and are in accordance with the InvIT Regulations and guidelines or circulars issued thereunder.
    3.4. The letter of offer shall contain disclosures as specified in Annexure I of this Circular.
    3.5. The letter of offer shall also be furnished to the Board in soft copy.
  4. Application
    4.1.The application form for the issue shall be prepared by the investment manager and the investment manager shall make arrangements for distribution of the application form along with letter of offer to all unit holders as on the record date at least five days prior to the opening of the issue.
  5. Pricing of Units
    5.1.The investment manager on behalf of the InvIT shall decide the issue price before determining the record date.
    5.2.The issue price shall be disclosed in the letter of offer.
  6. Timelines
    6.1. The rights issue shall open within three months from the record date.
    6.2.The rights issue shall be kept open for at least three working days but not more than fifteen working days.
  7. Manner of issuance of units
    7.1.The units shall be allotted in the dematerialized form only.
    7.2.The rights entitlements shall be credited to the demat account of the unitholders before the date of opening of the issue. 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 letter of offer and the notice sent to the unitholders shall contain a statement to this effect.
  8. Allotment
    8.1.The minimum allotment to any investor shall be INR 1 crore.
    8.2.Allotment shall be made in the following manner:
    8.2.1. 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 has/have applied for the units renounced in their favour, in full or in part, as adjusted for fractional entitlement.
    8.2.2. 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.
    8.2.3. allotment to the renouncees, 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.
    8.2.4. 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 letter of offer as applicable.
  9. Restriction on further capital issues
    9.1.The InvIT shall not make any further issue of units in any manner during the period between the date of filing the letter of offer with the Board and the allotment of the units offered through the letter of offer.
    9.2.The InvIT shall file an allotment report with the Board providing details of the allottees and allotment made within 15 days of the issue closing date.

https://www.sebi.gov.in/legal/circulars/nov-2020/guidelines-for-rights-issue-of-units-by-an-unlisted-infrastructure-investment-trust-invit-_48082.html

For disclosures in the letter of offer, please visit the above link.

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