Section 18 in Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014
18. Investment conditions and dividend policy.
(1)The investment by an InvIT shall only be in [holdco and/or] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPVs or infrastructure projects or securities in India in accordance with these regulations and the investment strategy as detailed in the offer document or Placement memorandum.(2)In case of PPP projects, the InvIT shall mandatorily invest in the infrastructure projects through [holdco and/or] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPV.(3)The InvIT may invest in infrastructure projects through SPVs subject to the following,-(a)no other shareholder or partner of the SPV shall [exercise] [Substituted 'have' by Notification No. SEBI/LAD-NRO/GN/2018/07, dated 10.4.2018 (w.e.f. 26.9.2014).] any rights that prevents the InvIT from complying with the provisions of these regulations and an agreement [has been] [Substituted 'shall be' by Notification No. SEBI/LAD-NRO/GN/2018/07, dated 10.4.2018 (w.e.f. 26.9.2014).] entered into with such shareholders or partners to that effect prior to investment in the SPV;[Provided that the shareholdersÂ’ agreement or partnership agreement shall provide for an appropriate mechanism for resolution of disputes between the InvIT and the other shareholders or partners in the holdco and/or the SPV:Provided further that the provisions of these regulations shall prevail in case of inconsistencies between such agreement(s) and the obligations cast upon an InvIT under these regulations.] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/07, dated 10.4.2018 (w.e.f. 26.9.2014).](b)in case the SPV is a company [/LLP] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).], the investment manager, in consultation with the trustee, shall appoint [majority of] [Substituted 'not less than one authorized representative on' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] the board of directors or governing board of such SPVs [as applicable] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).];(c)the investment manager shall ensure that the in every meeting including annual general meeting of the SPV, the voting of the InvIT is exercised.(3A)[ The InvIT may invest in infrastructure projects through holdcos subject to the following,-(a)the ultimate holding interest of the InvIT in the underlying SPV(s) is not less than twenty six per cent;(b)no other shareholder or partner of the holdco or the SPV(s) shall [exercise] any rights that prevent the InvIT, the HoldCo or the SPV(s) from complying with the provisions of these regulations and an agreement [has been] [Substituted 'shall be' by Notification No. SEBI/LAD-NRO/GN/2018/07, dated 10.4.2018 (w.e.f. 26.9.2014).] entered into with such shareholders or partners to that effect prior to investment in the holdco/SPV;[Provided that the shareholdersÂ’ agreement or partnership agreement shall provide for an appropriate mechanism for resolution of disputes between the InvIT and the other shareholders or partners in the holdco and/or the SPV:Provided further that the provisions of these regulations shall prevail in case of inconsistencies between such agreement(s) and the obligations cast upon an InvIT under these regulations.] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/07, dated 10.4.2018 (w.e.f. 26.9.2014).](c)the investment manager, in consultation with the Trustee, shall appoint the majority of the Board of directors or governing board of the holdco and SPV(s);(d)the investment manager shall ensure that in every meeting including annual general meeting of the Holdco and SPV(s), the voting of the InvIT is exercised;](4)[ In case of InvIT as specified under sub-regulation (2) of regulation 14, the InvIT shall invest not less than eighty per cent of the value of the InvIT assets in eligible infrastructure projects either directly or through holdcos or through SPVs:Provided that un-invested funds may be invested in instruments as provided under sub-clause (ii), (iii), (iv) and (v) of clause (b) of sub-regulation 5 of Regulation 18.] [Substituted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).](5)In case of InvITs as specified under sub-regulation (4) of regulation 14,-(a)not less than eighty per cent. of the value of the [InvIT] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] assets shall be invested, proportionate to the holding of the InvITs, in completed and revenue generating infrastructure projects subject to the following;(i)if the investment has been made through a [holdco and/or] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPV [(s)] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).], whether by way of equity or debt or equity linked instruments or partnership interest, only the portion of direct investments in eligible infrastructure [completed and revenue generating] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] projects by such [holdco and/or SPV(s)] [Substituted 'SPVs' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] shall be considered under this sub-regulation and the remaining portion shall be included under clause (b);(ii)if any project is implemented in stages, the part of the project which can be categorised as completed and revenue generating project shall be considered under this sub-regulation and the remaining portion shall be included under clause (b);(b)not more than twenty per cent. of value of the [InvIT] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] assets, [***] [Omitted 'proportionate to the holding of the InvITs' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).], shall be invested in,-(i)under-construction infrastructure projects, whether directly or through [holdco and/or] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPVs:Provided that investment in such assets shall not exceed ten per cent. of the value of the [InvIT assets] [Substituted 'assets of the InvIT' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).];(ii)listed or unlisted debt of companies or body corporate in infrastructure sector:Provided that this shall not include any investment made in debt of the [holdco and/or SPV(s)] [Substituted 'SPV' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).];(iii)equity shares of companies listed on a recognized stock exchange in India which derive not less than eighty per cent. of their operating income from infrastructure sector as per the audited accounts of the previous financial year;(iv)government securities;(v)money market instruments, liquid mutual funds or cash equivalents;(c)if the conditions specified in clauses (a) and (b) are breached on account of market movements of the price of the underlying assets or securities, the investment manager shall inform the same to the trustee and ensure that the conditions as specified in this regulation are satisfied within six months of such breach:Provided that the period may be extended to one year subject to approval from investors in accordance with regulation 22.(5A)[ The investment conditions as specified at sub-regulation (4) and (5) of regulation 18 and sub-regulation shall be complied at the time of Offer document/placement memorandum and thereafter.] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).](6)With respect to distributions made by the InvIT and the [holdco and/or] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPV,-(a)not less than ninety per cent. of net distributable cash flows of the SPV shall be distributed to the InvIT [/holdco] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] in proportion of its holding in the SPV subject to applicable provisions in Companies Act, 2013 or Limited Liability Partnership Act, 2008;(b)not less than ninety per cent. of net distributable cash flows of the InvIT shall be distributed to the unit holders;(ba)[ with regard to distribution of net distributable cash flows by the holdco to the InvIT, the following shall be complied: [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).](i)with respect to the cash flows received by the holdco from underlying SPVs, 100% of such cash flows received by the holdco shall be distributed to the InvIT; and(ii)with respect to the cash flows generated by the holdco on its own, not less than 90% of such net distributable cash flows shall be distributed by the holdco to the InvIT](c)such distributions shall be declared and made not less than once every six months in every financial year in case of publicly offered InvITs and not less than once every year in case of privately placed InvITs and shall be made not later than fifteen days from the date of such declaration;(d)subject to [sub-] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] clause (c), such distribution shall be [***] [Omitted 'as per the dates and the' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] in the manner as mentioned in the offer document or placement memorandum.(7)If any infrastructure asset is sold by the InvIT or [holdco or] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPV or if the equity shares or interest in the [holdco/] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPV are sold by the InvIT,-(a)if the InvIT [***] [Omitted 'or SPV' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] proposes to re-invest the sale proceeds into another infrastructure asset, it shall not be required to distribute any sales proceeds to the InvIT or to the investors;(b)If the InvIT [***] [Omitted 'or SPV' by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] proposes not to invest the sales proceeds into any other infrastructure asset, [within a period of one year] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] it shall be required to distribute the same in accordance with sub-regulation (6).(8)If the distributions are not made within fifteen days of declaration, then the investment manager shall be liable to pay interest to the unit holders at the rate of fifteen per cent. per annum till the distribution is made and such interest shall be not be recovered in the form of fees or any other form payable to the investment manager by the InvIT.(9)An InvIT shall not invest in units of other InvITs.(10)An InvIT shall not undertake lending to any person [other than the holdco/SPV(s) in which the InvIT has invested in] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).]:Provided that investment in debt securities shall not be considered as lending.(11)An InvIT shall hold an infrastructure asset for a period of not less than three years from the date of purchase of such asset by the InvIT, directly or through [holdco and/or] [Inserted by Notification No. SEBI/LAD-NRO/G.N./2016-17/021, dated 29.11.2016 (w.e.f. 26.9.2014).] SPV:Provided that this shall not apply to investment in securities of companies in infrastructure sector other than SPVs.(12)In case of any co-investment with any person(s) in any transaction,-(a)the investment by the other person(s) shall not be at terms more favourable than those to the InvIT;(b)the investment shall not provide any rights to the person(s) which shall prevent the InvIT from complying with the provisions of these regulations;(c)the agreement with such person(s) shall include the minimum percentage of distributable cash flows that will be distributed and entitlement of the InvIT to receive not less than pro rata distributions and mode for resolution of any disputes between the InvIT and the other person(s).(13)No schemes shall be launched under the InvIT.(14)The Board may specify any additional conditions for investments by the InvIT as deemed fit.
