The Securities and Exchange Board of India (SEBI) has introduced greater flexibility in borrowing usage by Infrastructure Investment Trusts (InvITs). According to reports from The Hindu BusinessLine, the regulator has widened the permissible use of borrowings for InvITs where net borrowings exceed 49 per cent of the value of assets. This enhancement aims to improve asset performance and expand capacity for completed infrastructure projects.
SEBI has permitted the use of such borrowings for improving asset performance, augmenting capacity, major maintenance expenses for road projects, and refinancing existing debt. As reported by The Hindu BusinessLine, 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. The regulator has clarified that refinancing would be permitted only for the principal portion of the original debt and only where the initial borrowing was raised for permitted purposes.
In a separate circular, SEBI has eased norms for special purpose vehicles (SPVs) holding infrastructure projects whose concession agreements have ended or been terminated. According to The Hindu BusinessLine, 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. SEBI has mandated additional disclosures by InvITs on such SPVs, including details of liabilities, pending claims, debt repayment schedules and exit plans.
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. As reported by The Hindu BusinessLine, time taken to obtain regulatory approvals for sale, merger, liquidation or winding-up of the SPV will be excluded from the calculation. SEBI has mandated additional disclosures by InvITs on such SPVs, including details of liabilities, pending claims, debt repayment schedules and exit plans. The regulator has specifically 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. According to The Hindu BusinessLine, 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. The new framework permits refinancing of eligible debt and allows completed-project SPVs to retain status under specified conditions, supporting continued growth in the infrastructure financing sector.
