The Securities and Exchange Board of India (SEBI) has amended rules governing Infrastructure Investment Trusts (InvITs), allowing special purpose vehicles (SPVs) to retain their SPV status even after the completion or termination of concession agreements, subject to certain conditions. According to reports from CNBC TV18 and The Economic Times, the regulator has implemented these changes immediately, providing clarity for existing InvIT structures. Additionally, SEBI has expanded borrowing rules for InvITs with leverage exceeding 49% of asset value, allowing fresh borrowings above this threshold for capital expenditure aimed at enhancing asset performance or augmenting capacity.
SEBI has now permitted the use of additional debt for major maintenance expenses related to road projects, specifically covering non-routine maintenance obligations specified under concession agreements. As per SEBI's circular, "Major maintenance expense shall mean expenditure incurred on maintenance of road project which is not routine maintenance and is in accordance with the obligations and requirements specified in the concession agreement." The regulator has also allowed refinancing of existing debt by InvITs, special purpose vehicles and holding companies, subject to conditions where only the principal portion of the original debt can be refinanced and the earlier borrowing must have been used for purposes already permitted under InvIT regulations. According to The Economic Times, accrued interest, fees and other charges will not be eligible for refinancing.
Under the revised framework, investment managers will be required to either exit investments in such SPVs through sale, liquidation, winding-up or merger, or acquire a new infrastructure project within the SPV within one year from the later of: completion or termination of the concession agreement, conclusion of pending litigation or tax assessments, or completion of the defect liability period. As reported by CNBC TV18 and The Economic Times, SEBI has clarified that the time taken to obtain statutory or regulatory approvals for exiting investments through sale, merger or winding-up would be excluded from this one-year timeline. The one-year period will be counted from the later of the completion or termination of the concession agreement, conclusion of pending claims, litigation or tax assessments, and related appeals, or completion of the defect liability period.
SEBI has mandated enhanced disclosures for such SPVs in the annual reports of InvITs, including details of the project, status of vesting certificates, assets and liabilities, contingent liabilities, outstanding debt and repayment schedules, adequacy of assets to meet liabilities, and timelines for exiting investments or acquiring new projects. According to the regulatory changes reported by CNBC TV18 and The Economic Times, investment managers will additionally be required to disclose pending claims, litigation, statutory obligations and details related to defect liability periods concerning such SPVs. Until the investment is exited or a new project is acquired, InvITs will be required to provide detailed disclosures in their annual reports, including the value of investments in such SPVs, project details, status of vesting certificates, assets and liabilities, contingent liabilities, debt repayment schedules, adequacy of assets to meet liabilities, and the proposed exit strategy and timeline.
SEBI has stated that both the SPV retention rules and enhanced borrowing permissions have come into effect immediately, providing immediate clarity for existing InvIT structures and their SPV arrangements. The regulatory changes address the transition period for infrastructure projects when concession agreements conclude, ensuring proper management of these assets within the InvIT framework while improving funding access for road-focused InvITs undertaking large-scale repair and maintenance works. The move follows amendments to the SEBI (Infrastructure Investment Trusts) Regulations notified in April, which allowed additional borrowing beyond the 49 per cent threshold for purposes specified by the regulator.
