The Securities and Exchange Board of India (SEBI) has issued a circular announcing amendments to the guidelines for preferential issue and institutional placement of units by listed Real Estate Investment Trusts (REITs). The circular modifies the pricing of units and provides clarity on relevant dates for institutional placement. This article provides an analysis of the amendments and their implications for REITs.
Analysis: The circular modifies Clause 2 of Annexure II of the previous guidelines issued by SEBI. It states that the institutional placement should be made at a price not lower than the average of the weekly high and low of the closing prices of units of the same class quoted on the stock exchange during the two weeks preceding the relevant date. The REIT is allowed to offer a discount of up to five percent on the calculated price, subject to approval from unitholders through a resolution.
This amendment aims to provide greater flexibility and transparency in determining the pricing of units during institutional placements. By considering the average prices over a two-week period, it helps to prevent undue fluctuations and ensures a fair valuation for investors. The option to offer a discount provides an additional incentive for investors, potentially attracting more participation in institutional placements.
The circular emphasizes that the amendments are applicable with immediate effect. REITs and other relevant entities are expected to adhere to the revised guidelines while conducting preferential issues and institutional placements of units. SEBI’s move to continuously review and update the guidelines reflects its commitment to maintaining a robust and transparent market for REITs.
Conclusion: The amendments to the guidelines for preferential issue and institutional placement of units by listed REITs introduced by SEBI provide clarity and flexibility in determining unit pricing. The modifications aim to enhance transparency and investor confidence in REITs. Market participants should ensure compliance with the revised guidelines to facilitate a fair and efficient market for REIT units.
Securities and Exchange Board of India
Circular No. SEBI/HO/DDHS-PoD-2/P/CIR/2023/114 Dated: July 05, 2023
To
All Real Estate Investment Trusts (“REITs”)
All Parties to REITs
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 REIT
1. SEBI issued circular SEBI/HO/DDHS/DDHS/CIR/P/2019/142 dated November 27, 2019 providing guidelines for preferential issue and institutional placement of units by listed REITs (“Guidelines”). The guidelines were subsequently revised vide circulars SEBI/HO/DDHS/DDHS/CIR/P/2020/35 dated March 13, 2020, SEBI/HO/DDHS/DDHS/CIR/P/2020/184 dated September 28, 2020, SEBI/HO/DDHS/DDHS_Div3/P/CIR/2022/116 dated August 26, 2022 and SEBI/HO/DDHS/DDHS_Div3/P/CIR/2022/130 dated September 28, 2022.
2. Pursuant to feedback received, the said guidelines for preferential issue and institutional placement of units by listed REITs stand modified as under:
I. Clause 2 of Annexure II of the SEBI circular dated November 27, 2019 (as amended), 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 REIT 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 REIT 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 – riteshn@sebi.gov.in
