Sebi plans framework for fast-track follow-on offer by REITs, InvITs

In its consultation paper, Sebi proposed that 15 per cent of the units allotted to sponsors and sponsor group will be locked-in for a period of three years from the date of trading approval granted for the units. Further, the remaining units allotted to them will be locked-in for a period of one year from the date of trading approval granted for the units.

REITs are companies that own or finance real estate properties and provide a way for individuals to invest in real estate without directly owning physical properties. REITs allow individuals to invest in a diversified portfolio of properties, such as office buildings, apartments, shopping centres, and hotels, by buying shares of the REIT. InvITs are investment instruments that allow individuals to invest in infrastructure projects in India, such as roads, highways, power distribution networks, and telecom towers. They work similarly to mutual funds, pooling money from various investors to invest in income-generating infrastructure assets.

With regards to follow-on offer, Sebi said that the FPO is one of the mechanisms for raising funds subsequent to issue of units after initial public offer.

Sebi proposed that REIT and InvIT making an FPO needs to ensure that they made an application to all stock exchanges on which their units are listed and seek an in-principle approval for listing of their units on such exchanges. They need to choose one of them as the designated stock exchange.

Sebi said the manager and the merchant bankers should be responsible for obtaining in-principle approval and final listing and trading approvals from the stock exchanges. The minimum public unitholding should be at least 25 percent of the total outstanding units of the REIT on a post issue basis. “A REIT/InvIT shall not undertake any further issue of units in any manner whether by way of public issue, rights issue, preferential issue, institutional placement or otherwise, except pursuant to a unit-based employee benefit scheme (if any) during the period between the date of filing of the draft follow-on offer document/follow-on offer document for follow-on offer and the listing of the units or refund of application money,” Sebi proposed. Further, REIT/InvIT should file the draft follow-on offer document, through the merchant banker with the Board, for its observations.

The follow-on offer document, after incorporating the observations of Sebi, will be filed with the regulator and recognised stock exchanges. The merchant banker should, along with the filing of the draft follow-on offer document, furnish due diligence certificate to the markets regulator.

Sebi has sought public comments by March 13 on the proposals. Last week, the regulator proposed REITs and InvITs to disclose financial information in their offer documents inline with public issue and listing norms.