Guidelines for Preferential Issue of Units by InvITs

SEBI issued a circular dated June 5, 2018 (‘Circular’) setting out guidelines for preferential issue of units by InvITs.As per the Circular, listed InvITs may make a preferential issue of units to an institutional investor subject to the fulfillment of the following conditions:

i. Conditions for preferential issue: (a) Unitholders of the InvIT have to pass a resolution approving the preferential issue; (b) InvIT must be in compliance with the minimum public unitholding requirements, conditions for continuous listing and disclosure obligations; (c) No preferential issue of units by the InvIT should have been made in the six months preceding the relevant date and the issue will be completed within 12 months of the authorizing resolution; (d) The preferential issue of units can be offered to a minimum of two and maximum of 1000 investors in a financial year.

ii. Placement document: The preferential issue of units by an InvIT will be done on the basis of a placement document, which must contain disclosures as specified in the Circular. While seeking in-principle approval from the recognised stock exchange, InvIts to furnish a copy of the placement document, a certificate issued by its merchant banker or statutory auditor confirming compliance with the provisions of this Circular along with any other documents required by the stock exchange

iii. Pricing: The preferential issue is required to be made at a price not less than the average of the weekly high and low of the closing prices of the units quoted on the stock exchange during the two weeks preceding the relevant date. The InvIT cannot allot partly paid-up units. Further, the prices determined for preferential issue will be subject to appropriate adjustments, if the InvIT: (i) makes a right issue of units; and (ii) is involved in such other similar events or circumstances, which in the opinion of the concerned stock exchange, requires adjustments.

iv. Restriction on allotment: No allotment can be made to any party to the InvIT or their related parties except to the sponsor.

v. Restriction on transferability: The units allotted under preferential issue cannot be sold by the allotee for a period of one year from the date of allotment, except on a recognized stock exchange.

Published In:Inter Alia - Quarterly Edition - June 2018 [ English Chinese japanese ]
Date: June 1, 2018