SEBI Allows Depository Receipts Against REIT, InvIT Units To Attract Foreign Investment

New Delhi, Nov 3 (KNN) The Securities and Exchange Board of India (SEBI) on Monday permitted the issuance of Depository Receipts (DRs) against units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to attract foreign investment.

DRs are foreign currency-denominated instruments issued by overseas depositories against securities held by domestic custodians in India. Under the framework, REITs and InvITs can issue fresh units or facilitate the transfer of existing units for DR issuance, according to separate SEBI circulars.

The DRs will be listed on designated international exchanges in India's International Financial Services Centre (IFSC), including India International Exchange (India INX) and NSE International Exchange, reported PTI.

Proposed in August and approved by SEBI's board in September, the framework seeks to broaden foreign investment in REITs and InvITs.

Eligibility and approval requirements

SEBI has prescribed eligibility criteria, issuance procedures, pricing norms and compliance requirements for DR offerings.

REITs, InvITs and their associated parties, including directors, promoters, partners and transferring unitholders, must not be debarred from accessing capital markets, classified as wilful defaulters or designated as fugitive economic offenders.

Entities with promoters or directors linked to companies, REITs or InvITs debarred by SEBI will also be ineligible, unless the earlier debarment period has expired before the offer document is filed.

SEBI has also mandated that DR holders and their beneficial owners must be non-residents of India, with compliance being their responsibility. The REIT manager or InvIT investment manager must file the initial offer document with SEBI and recognised stock exchanges through a merchant banker. 

SEBI will provide its comments within seven working days, while stock exchanges must decide on in-principle approval within 15 working days of receiving the application and required documents.

Unitholder approval and public holding norms

Fresh DR issuances will require approval from unitholders, with at least 75 per cent of votes cast in favour. Exemptions will apply to simultaneous domestic and DR listings during an initial offering and subsequent issuances within the limit already approved by unitholders.

For DR listings involving transfers of existing units, REITs and InvITs must give all unitholders an opportunity to tender their units.

Managers must ensure compliance with minimum public unitholding requirements, with units deposited with domestic custodians for DR issuance classified as non-public holdings.

They must also appoint a merchant banker to oversee regulatory compliance and submit a report to the respective board of directors.

Pricing, disclosures and monitoring

SEBI has mandated that units issued or transferred for DRs in simultaneous domestic and international listings cannot be priced below the corresponding domestic offering, preferential allotment or institutional placement. The same pricing norms will apply to separate DR issuances.

REIT and InvIT managers must file disclosures made on international exchanges with recognised Indian stock exchanges within 24 hours. DR holders will exercise voting rights attached to underlying units through foreign depositories, based on their voting instructions, SEBI said.

For better monitoring, domestic custodians must maintain records of DR issuances and cancellations and report them to Indian depositories. Foreign depositories can issue DRs only after receiving confirmation that the underlying units have been deposited with domestic custodians.

The framework has come into immediate effect, SEBI said.

(KNN Bureau)