The Securities and Exchange Board of India (SEBI) on Thursday allowed greater flexibility in the use of borrowings by Infrastructure Investment Trusts (InvITs) and eased norms for special purpose vehicles (SPVs) after the completion or termination of concession agreements.
The regulator widened the permissible use of borrowings for InvITs where net borrowings exceed 49 per cent of the value of assets, aimed at enhancing asset performance or expanding capacity. SEBI has permitted the use of such borrowings to improve asset performance or augment capacity, major maintenance expenses for road projects, and refinancing existing debt, subject to conditions
Refinancing limits
Refinancing would be allowed only for the principal portion of the original debt and only if the initial borrowing was used for permitted purposes. Interest costs, penalties or other charges cannot be refinanced under the relaxation, SEBI said.
In a separate circular, SEBI eased norms for SPVs holding infrastructure projects whose concession agreements have ended or been terminated. Such SPVs will continue to retain their classification as SPVs provided the InvIT either exits the investment or acquires a new infrastructure project in the SPV within one year.
The one-year timeline will start after the later of project completion, conclusion of pending litigations or tax assessments, or completion of the defect liability period. Time taken to obtain regulatory approvals for sale, merger, liquidation or winding-up of the SPV will be excluded from the calculation.
SEBI has also mandated additional disclosures by InvITs on such SPVs, including details of liabilities, pending claims, debt repayment schedules and exit plans.
The regulator has asked InvITs to disclose “a clear plan of action detailing how and when the InvIT intends to exit its investment in the SPV or plans to acquire new infrastructure projects.”
Both moves follow amendments made to the InvIT regulations in April this year to expand the permissible use of debt above the prescribed threshold and allowing SPVs linked to completed infrastructure projects to continue retaining their SPV status subject to certain conditions.
The changes come as the InvIT market continues to expand, with several large infrastructure developers using the structure to monetise operational assets while raising long-term capital.