Securities and Exchange Board of India
Circular No. CIR/IMD/DF/136/2016
Dated: December 19, 2016
All Real Estate Investment Trusts (REITs)
All Parties to REITs
All Stock Exchanges All Merchant Bankers
Dear Sir / Madam,
Sub: Guidelines for public issue of units of REITs
1. SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”)provides as under:
a) Regulation 14(24) states that The Board may specify by issue of guidelines or circulars any other requirements, as it deems fit, pertaining to issue and allotment of units by a REIT.’
b) Regulation 15(5) states that ‘The advertisements shall be in accordance with the offer document and any circulars or guidelines as may be specified by the Board in this regard’
2. In line with the aforesaid Regulations, the detailed guidelines as placed at Schedule-A shall be applicable to public issue of units of REITs.
3. This Circular is issued in exercise of powers conferred under Section 11(1) of Securities and Exchange Board of India Act, 1992 read with Regulation 33 of REIT Regulations.
4. This Circular is available on SEBI website at sebi.gov.in under the categories “Legal Framework” and under the drop down “Circulars”.
Richa G. Agarwal
Deputy General Manager
Investment Management Department
Tel No.022-2644 9596
Email id – firstname.lastname@example.org
Guidelines for public issue of units of REITs
1. Appointment and obligations of merchant banker and others:
(1) The Manager on behalf of the REIT, in line with Regulation 10 (5) of REIT Regulations, shall appoint one or more merchant bankers, at least one of whom shall be a lead merchant banker and shall also appoint other intermediaries, in consultation with the merchant banker(s), to carry out the obligations relating to the issue.
(2) Where the issue is managed by more than one merchant banker, the rights, obligations and responsibilities, relating inter alia to disclosures, allotment, refund and underwriting obligations, if any, of each merchant banker shall be predetermined and disclosed in the offer document.
2. Filing of offer document
(1) Draft offer document, offer document and final offer document shall mean as under:
a. Draft offer document refers to the draft of the offer document filed with the Board and the stock exchanges.
b. Offer document refers to the version of the offer document filed with the Board and the stock exchanges incorporating all updations except the price / price band.
c. Final offer document refers to the version of the offer document filed with the Board and the stock exchanges including details with respect to pricing, allotment etc. .
(2) The draft offer document shall be filed with the Board and the designated stock exchanges in accordance with REIT Regulations.
(3) The lead merchant banker shall submit the following to the Board along with the draft offer document:
(a) a certificate, confirming that an agreement has been entered into between the Manager on behalf of the REIT and the merchant bankers;
(b) a due diligence certificate as per Form A of Annexure I,
(4) The draft offer document shall be hosted on the websites as specified under Regulation 14(5) of the REIT Regulations and the period of hosting on the website for comments, if any, shall be at least twenty one days. The lead merchant banker shall file a statement with the Board giving information of the comments received by them or the REIT or the parties to the REIT on the draft offer document during that period and the consequential changes, if any, to be made in the draft offer document.
(5) Subject to regulation 14(7), (8) and (9) of REIT Regulations, the Board may specify changes or issue observations, if any, on the draft offer document within the later of the following:
(a) thirty days from the later of the following dates:
(i) the date of receipt of the draft offer document by the Board; or
(ii) the date of receipt of clarification or information from any regulator or agency, where the Board has sought any clarification or information from such regulator or agency; or
(iii) the date of receipt of a copy of in-principle approval letter issued by the recognised stock exchanges;
(b) twenty one working days from the date of receipt of satisfactory reply from the lead merchant banker, where the Board has sought any clarification or additional information from them;
(6) The merchant banker(s) shall ensure that all comments received from the Board on the draft offer document are suitably addressed prior to the filing of the offer document with the Board and designated stock exchanges;
(7) The lead merchant banker shall submit the following documents to the Board along with the offer document:
(a) a statement certifying that all changes, suggestions and observations made by the Board have been incorporated in the offer document;
(b) a due diligence certificate as per Form B of Annexure I
(8) If changes are made in the draft offer document or offer document with respect to any of the following, the lead merchant banker shall file fresh draft offer document with the Board highlighting all changes made in the draft offer document or offer document, as applicable, along with the fees as specified in REIT Regulations:
(a) Change in sponsor(s), sponsor group, Manager or persons in control of the sponsor(s)/ Manager.
Provided that, in case of change in sponsor group, fresh filing shall be applicable only if the involved sponsor group entity(ies) hold/propose to hold more than 5% of the total units of the REIT after initial offer on a post-issue basis.
(b) Change in more than half of the board of directors of the Manager.
(c) Change in any object(s) of the issue contributing/amounting to more than 20% of the issue size.
(d) Any increase or decrease in estimated issue size by more than twenty five per
(9) All other changes/ updations in the draft offer document or offer document which are not covered under clause (8) above shall be carried out by the lead merchant banker and offer document with updated details shall be filed with the Board without fees.
(10) The manager shall, after filing the offer document with the Board, make a pre‑issue advertisement on the website of the sponsor, manager and stock exchanges.
(11) The manager may also issue such pre-issue advertisement in any newspaper and on the website of the REIT, if applicable.
3. Allocation in public issue.
(1) In an issue made through the book building process or otherwise, the allocation in the public issue shall be as follows:
(a) not more than 75% to Institutional Investors
(b) not less than 25% to other investors
Explanation: Institutional Investors is as defined under Regulation106X of SEBI (Issue Of Capital And Disclosure Requirements) Regulations, 2009.
(2) Manager of the REIT in consultation with merchant banker(s) may allocate upto 60% of the portion available for allocation to Institutional Investors to anchor investors as under:
(a) An Anchor Investor shall make an application of a value of at least Rs. 10 crore in the public issue;
(b) Allocation to Anchor Investors shall be on a discretionary basis and subject to the minimum of 2 investors for allocation upto Rs. 250 crore and minimum of 5 investors for allocation of more than Rs. 250 crore.
(c) The bidding for Anchor Investors shall open one day before the issue opening date and allocation to Anchor Investors shall be completed on the same day.
(d) If the price fixed as a result of book building is higher than the price at which the allocation is made to Anchor Investor, the Anchor Investor shall bring in the additional amount within two days of the date of closure of the issue. However, if the price fixed as a result of book building is lower than the price at which the allocation is made to Anchor Investor, the excess amount shall not be refunded to the Anchor Investor and the Anchor Investor shall take allotment at the price at which allocation was made to it.
(e) The number of units allocated to Anchor Investors and the price at which the allocation is made, shall be made available on the website of the stock exchange(s), sponsor(s),manager and merchant banker(s)before opening of the issue.
(f) There shall be a lock-in of 30 days on the units allotted to the Anchor Investor from the date of allotment in the public issue.
(g) Neither the merchant banker(s) nor any person related to the merchant banker(s) in the concerned public issue can apply under Anchor Investor category except Mutual Funds, Insurance Companies and Pension Funds.
(h) The parameters for selection of Anchor Investor shall be clearly identified by the merchant banker(s).
4. Application and Abridged version of the offer document.
(1) The application form and the abridged version of the offer document as stated in Regulation 14(13) of the REIT Regulations for the issue shall be prepared by the merchant banker(s).
(2) The merchant banker(s) shall make arrangements for distribution of the application form along with a copy of the abridged version of the offer document.
(3) The abridged version of the offer document shall contain the disclosures as specified in Annexure III and shall not contain any matter extraneous to the contents of the offer
(4) No person shall make an application in the public issue for that number of units which exceeds the number of units offered to public.
5. Security Deposit
(1) The Manager on behalf of the REIT shall deposit, before the opening of subscription, and keep deposited with the stock exchange(s), an amount calculated at the rate of 0.5% of the amount of units offered for subscription to the public or Rs 5 crore, whichever is lower.
(2) The manner of deposit/refund/release/forfeiture of such deposit shall be in the manner specified by the stock exchange(s)and by the Board from time to time.
6. Opening of an issue and subscription period.
(1) An issue shall be opened after atleast five working days from the date of filing the offer document with the Board.
(2) The lead merchant banker shall submit a due diligence certificate as per Form C of Annexure I, immediately before the opening of the issue.
(3) A public issue shall be kept open for at least three working days but not more than thirty days. However, in case the price band in a public issue made through the book building process is revised, the bidding (issue) period disclosed in the final offer document shall be extended for a minimum period of one working day, provided however that the total bidding period shall not exceed thirty days.
Provided the price revision can be done maximum twice during the bidding period.
(4) The manager on behalf of the REIT may issue advertisements for issue opening and issue closing.
(1) Where the REIT desires to have the issue underwritten, it shall appoint the underwriters in accordance with SEBI (Underwriters) Regulations, 1993.
(2) The merchant banker(s) and syndicate members shall not subscribe to the issue in any manner except for fulfilling their underwriting obligations.
(3) In case of underwritten issue, the merchant banker(s) shall undertake minimum underwriting obligations as specified in the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
8. Price and price band.
(1) The manager on behalf of the REIT may determine the price of units in consultation with the merchant banker(s) or through the book building process.
(2) Differential price shall not be offered to any investor.
(3) The manager on behalf of the REIT shall announce the floor price or price band at least five working days before the opening of the bid (in case of an initial public offer) on the website of the sponsor, manager and stock exchanges and in all the newspapers in which the pre issue advertisement was released and website of REIT, if applicable.
(4) The announcement referred to in clause 8(3) above shall contain relevant financial ratios computed for both upper and lower end of the price band and also a statement drawing attention of the investors to the section titled “basis of issue price” in the offer document.
(5) The floor price or price band and the relevant financial ratios referred to in clause 8(4) shall be disclosed on the websites of those stock exchanges where the units are proposed to be listed.
(6) The floor price or price band shall be pre-filled in the application forms available on the websites of the stock exchanges.
(7) The Manager on behalf of the REIT shall, in consultation with merchant banker(s), determine the issue price based on the bids received.
(8) Once the final price (cut-off price) is determined, all those bidders whose bids have been found to be successful (i.e. at and above the final price or cut-off price) shall be entitled for allotment of units.
(9) The merchant banker(s) may reject a bid placed by a qualified institutional buyer for reasons to be recorded in writing provided that such rejection shall be made at the time of acceptance of the bid and the reasons therefore shall be disclosed to the bidders.
9. Bidding process
(1) In all issues, the REIT shall accept bids including using ASBA facility, if so opted.
(2) An amount to the extent of entire application money shall be collected or blocked, as the case may be, from the applicants before they place an order on their behalf.
(3) The payment accompanied with any revision of Bid, shall be adjusted against the payment made at the time of the original bid or the previously revised bid.
(4) The stock brokers shall collect the money from their client for every order placed by them and in case the clients/investors fail to pay for units allocated, the stock brokers shall pay such amount.
Provided that in case of ASBA, the Self Certified Syndicate Banks or Syndicate members shall follow the procedure specified in this regard by the Board.
(5) Bidding process shall be only through an electronically linked transparent bidding facility provided by recognised stock exchange (s).
(6) The merchant banker(s) shall ensure that adequate infrastructure is available with syndicate members for data entry of the bids in a timely manner.
(7) The bidding terminals shall contain an online graphical display of demand and bid prices updated at periodic intervals, not exceeding thirty minutes.
(8) The manager on behalf of the REIT may decide to close the bidding by institutional investors one day prior to the closure of the issue subject to the condition that bidding shall be kept open for a minimum of three days for all categories of applicants and suitable disclosures made in the draft offer document and offer document.
(9) No investor shall either withdraw or lower the size of bids at any stage.
(10) The identity of Institutional Investors except anchor investors making the bidding shall not be made public.
(11) The stock exchanges shall continue to display on their website, the data pertaining to book built issues in a uniform format, inter alia giving category-wise details of bids received, for a period of atleast three days after closure of bids.
10. Allotment procedure and basis of allotment.
(1) On receipt of the sum payable on application, the manager on behalf of the REIT shall allot the units to the applicants.
(2) The allotment of units to applicants other than anchor investors shall be on proportionate basis within the specified investor categories and the number of units allotted shall be rounded off to the nearest integer, subject to minimum allotment as per REIT Regulations.
(3) In case of under-subscription in any investor category, the unsubscribed portion in either of the category specified in clause 3(1) may be allotted to applicants in the other category.
(4) The authorized representatives of the designated stock exchange along with the post issue merchant bankers and registrars to the issue shall ensure that the basis of allotment is finalized in a fair and proper manner.
11. Maintenance of books and records
(1) A final book of demand showing the result of the allocation process shall be maintained by the merchant banker(s).
(2) The merchant banker(s) and other intermediaries associated in the book building process shall maintain records of the book building prices.
(3) The Board shall have the right to inspect the records, books and documents relating to the book building process and such person shall extend full co-operation.
12. Post- issue reports.
(1) The lead merchant banker shall submit the following post-issue reports to the Board:
(a) initial post issue report as specified in Part A of Annexure II, within three working days of closure of the issue.
(b) final post issue report as specified in Part B of Annexure II, within fifteen days of the date of finalization of basis of allotment or within fifteen days of refund of money in case of failure of issue.
(2) The lead merchant banker shall submit a due diligence certificate along with the final post issue report as per Form D of Annexure I.
13. Public communications, publicity materials, advertisements and research reports.
(1) Any public communication including advertisement, publicity material, research reports, etc. concerned with the issue shall not contain any matter extraneous to the contents of the draft offer document/offer document.
Explanation: Public communication includes but not limited to corporate, project and issue advertisements of the REIT, interviews, blogs, social media posts by its sponsors, sponsor group, manager, trustee, directors of any of the parties to the REIT, duly authorized employees or representatives of the REIT/Manager, documentaries about the REIT or its sponsors, periodical reports, press releases, etc.
(2) The Manager on behalf of the REIT shall make prompt, true and fair disclosure of all developments taking place between the date of filing offer document with the Board and the date of allotment of units which may have a material effect on the REIT, by issuing public notices on the website of the sponsor, manager and stock exchanges and in all the newspapers in which the pre issue advertisement was released and website of REIT, if applicable.
(3) In respect of all public communications, the Manager on behalf of the REIT shall obtain approval from the merchant bankers responsible for marketing the issue.
(4) Any such public communication shall comply with the following:
(a) it shall be truthful, fair and shall not be manipulative or deceptive or distorted.
(b) it shall not contain any statement or promise which is untrue or misleading.
(c) if it reproduces or purports to reproduce any information contained in an offer document, it shall reproduce such information in full and disclose all relevant facts and not be restricted to select extracts relating to that information.
(d) it shall be set forth in a clear, concise and understandable language.
(e) it shall not include any issue slogans or brand names for the issue except the normal commercial name of the sponsor/manager.
(f) it shall not use extensive technical, legal terminology or complex language and excessive details which may distract the investor.
(g) it shall not contain statements which promise or guarantee rapid increase in profits /yield/returns
(h) it shall not display models, celebrities, fictional characters, landmarks or caricatures or the likes.
(i) no issue advertisement shall appear in the form of crawlers (the advertisements which run simultaneously with the programme in a narrow strip at the bottom of the television screen) on television.
(j) in any issue advertisement on television screen, the risk factors shall not be scrolled on the television screen and the advertisement shall advise the viewers to refer to the red herring prospectus or other offer document for details.
(k) It shall not contain slogans, expletives or non-factual and unsubstantiated titles.
(I) if it contains highlights, it shall also contain risk factors with equal importance in all respects including print size of not less than point seven size.
(5) No such public communication shall be issued giving any impression that the issue has been fully subscribed or oversubscribed during the period the issue is open for subscription.
(6) No such public communication shall contain any offer of incentives, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise.
(7) The merchant bankers shall submit a compliance certificate in respect of news reports appearing for the period between the date of filing the draft offer document with the Board and the date of closure of the issue in accordance with Regulation 60(14) of ICDR Regulations.
14. Other Obligations of Post-issue merchant banker
(1) Obligations of the post-issue merchant banker(s) with respect to refund, allotment, payment of interest to applicants in case of delayed allotment/refund, etc. shall be as per the disclosure in the offer document.
(2) The post-issue merchant banker(s) shall regularly monitor redressal of investor grievances relating to post-issue activities such as allotment, refund, etc.
(3) The post-issue merchant banker(s) shall ensure that advertisement giving details relating to oversubscription, basis of allotment, number, value and percentage of all applications, number, value and percentage of successful allottees for all applications , date of completion of dispatch of refund orders or instructions to Self Certified Syndicate Banks by the Registrar, date of dispatch of certificates and date of filing of listing application, etc. is released within ten days from the date of completion of the above activities on the website of the REIT, sponsor, manager, stock exchanges and in all the newspapers in which the pre issue advertisement was released, if applicable.
(4) The post-issue merchant banker(s) shall ensure that REIT, advisors, brokers or any other entity connected with the issue do not publish any advertisement stating that issue has been oversubscribed or indicating investors’ response to the issue, during the period when the public issue is still open for subscription by the public.
(5) The post-issue merchant banker(s) shall continue to be responsible for post-issue activities till the subscribers have received credit to their demat account or refund of application moneys and the listing agreement is entered into by the REIT with the stock exchange and listing/ trading permission is obtained.
15. General conditions:
(1) Restrictions on issue: No REIT shall make a public issue of units, if the REIT or parties to the REIT or the promoter(s) or director(s) of parties to the REIT:
(a) is debarred from accessing the securities market by the Board;
(b) is a promoter, director or person in control of any other company or a sponsor, manager or trustee of any other REIT or REIT which is debarred from accessing the capital market under any order or directions made by the Board;
(c) is in the list of the willful defaulters published by the Reserve Bank of India.
(2) Alteration of rights of holders of units.
No REIT shall alter the terms (including the terms of issue) of units which may adversely affect the interests of the holders of that units unless a resolution to that effect is passed at a meeting of the unitholders in accordance with Regulation 22(5) of REIT Regulations.
(3) Prohibition on payment of incentives.
No person connected with the issue, including a person connected with the distribution of the issue, shall offer any incentive, whether direct or indirect, in any manner, whether in cash or kind or services or otherwise to any person for making an application for allotment of units:
Provided that nothing contained in this regulation shall apply to fees or commission for services rendered in relation to the issue.
(4) Appointment of Compliance Officer.
The compliance officer designated by the manager under Regulation 10(26) of the REIT Regulations shall be responsible for monitoring the compliance of the securities laws and for redressal of investors’ grievances.
Explanation: For the purpose of this clause, the term “securities laws” shall mean SEBI Act, 1992, SCRA, 1956, Depositories Act, 1996 and rules and regulations made thereunder, general or special orders, guidelines or circulars made or issued thereunder.
(5) General obligations of Merchant Bankers.
(a) The merchant bankers shall exercise due diligence and satisfy himself about all the aspects of the issue including the veracity and adequacy of disclosure in the offer documents.
(b) The merchant bankers shall call upon the REIT, parties to the REIT or directors of the parties to the REIT or in case of an offer for sale, the selling unit holders, to fulfill their obligations as disclosed by them in the offer document and as required in terms of these guidelines.
(c) The responsibility of the merchant bankers with respect to due diligence shall continue even after the completion of issue process.
(d) The merchant bankers shall ensure that the information contained in the offer document and the particulars as per audited financial statements in the offer document are not more than six months old from the issue opening date.
(e) The Manager on behalf of the REIT shall ensure that transactions in units by the sponsor, sponsor group and their associates during the period between the date of filing the offer document with the Board /designated stock exchange, as the case may be and the date of closure of the issue shall be reported to the recognised stock exchanges where the units of the REIT are listed or going to be listed, within twenty four hours of the transactions.