The Securities and Exchange Board of India (SEBI) has issued a circular, SEBI/HO/DDHS-PoD-2/P/CIR/2023/113, introducing amendments to the guidelines for preferential issue and institutional placement of units by listed Infrastructure Investment Trusts (InvITs). These amendments modify the pricing provisions for institutional placements, allowing InvITs to offer a discount of up to five percent on the calculated price. The circular aims to enhance flexibility in pricing and facilitate efficient capital raising for InvITs.
Analysis: SEBI initially issued guidelines for preferential issue and institutional placement of units by listed InvITs in November 2019. Since then, several revisions have been made based on feedback and evolving market conditions. The latest circular introduces amendments to Clause 2 of Annexure II, which pertains to the pricing of units in institutional placements.
Under the revised guidelines, the institutional placement of units must be priced at a level not lower than the average of the weekly high and low closing prices of units of the same class quoted on the stock exchange during the two weeks preceding the relevant date. The InvITs now have the flexibility to offer a discount of up to five percent on the calculated price, subject to the approval of unitholders through a resolution.
The concept of the “relevant date” is also clarified, indicating that it refers to the date of the meeting in which the board of directors of the manager decides to open the issue. These modifications provide greater pricing flexibility for InvITs and align the guidelines with market dynamics.
SEBI’s amendments aim to facilitate efficient capital raising by InvITs, allowing them to attract institutional investors through competitive pricing strategies. The discount provision offers an additional tool for InvITs to adjust pricing based on market conditions and investor demand.
Conclusion: SEBI’s circular announcing amendments to the guidelines for preferential issue and institutional placement of units by listed InvITs brings greater flexibility to the pricing framework. The introduction of a discount provision allows InvITs to adjust prices by up to five percent, subject to unitholder approval. These modifications aim to enhance the efficiency of capital raising and promote investor interest in InvITs. InvITs will now have more options to tailor their pricing strategies based on market conditions, ultimately benefiting both the InvITs and potential institutional investors.
Securities and Exchange Board of India
Circular No. SEBI/HO/DDHS-PoD-2/P/CIR/2023/113 Dated: July 05, 2023
To
All Infrastructure Investment Trusts (“InvITs”)
All Parties to InvITs
All Recognised Stock Exchanges
All Depositories
All Merchant Bankers
Madam/Sir
Sub: Amendments to guidelines for preferential issue and institutional placement of units by a listed InvIT
1. SEBI issued circular SEBI/HO/DDHS/DDHS/CIR/P/2019/143 dated November 27, 2019 providing guidelines for preferential issue and institutional placement of units by listed InvITs (“Guidelines”). The guidelines were subsequently revised vide circulars SEBI/HO/DDHS/DDHS/CIR/P/2020/36 dated March 13, 2020, SEBI/HO/DDHS/DDHS/CIR/P/2020/183 dated September 28, 2020, SEBI/HO/DDHS/DDHS/CIR/P/2020/232 dated November 17, 2020, SEBI/HO/DDHS/DDHS_Div3/P/CIR/2022/115 dated August 26, 2022 and SEBI/HO/DDHS/DDHS_Div3/P/CIR/2022/129 dated September 28, 2022.
2. Pursuant to feedback received, the guidelines for preferential issue and institutional placement of units by listed InvITs stand modified as under:
I. Clause 2 of Annexure II of SEBI Circular dated November 27, 2019 is modified as under:
“2. Pricing of Units
The institutional placement shall be made at a price not less than the average of the weekly high and low of the closing prices of the units of the same class quoted on the stock exchange during the two weeks preceding the relevant date:
Provided that the InvIT may offer a discount of not more than five percent on the price so calculated, subject to approval of unitholders through a resolution as specified in guideline 2.1.
Explanation: “relevant date” for the purpose of clauses related to institutional placement shall be the date of the meeting in which the board of directors of the manager decides to open the issue.
3. This circular shall be applicable with immediate effect.
4. This circular is being issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 and Regulation 33 of the InvIT Regulations. This circular is issued with the approval of the competent authority.
5. This Circular is available on the website of the Securities and Exchange Board of India at www.sebi.gov.in under the category “Legal” and under the drop down “Circulars”.
Yours faithfully,
Ritesh Nandwani
Deputy General Manager
Department of Debt and Hybrid Securities
Tel No.+91-22-2644 9696
Email id – [email protected]
