SEBI considers regulatory framework to allow REITs and InvITs to issue Depository Receipts

SEBI considers regulatory framework to allow REITs and InvITs to issue Depository Receipts

The market regulator Securities Exchange Board of India (in short SEBI), proposed to authorise Real Estate Investment Trusts (REITs) and Infrastructure Investment Trust (InvITs) to issue depository receipts to offer foreign investors an opportunity to participate in the units of Indian emerging investment instruments.

REITs and InvITs are set up as Business Trusts and hold and operate revenue-generating real estate or infrastructure assets, respectively. REITs and InvITs raise funds by issuing units to the public at large.

The SEBI stated in its consultation paper that this will be advantageous for foreign investors as depository receipts (DR) avoids the prerequisite to trade directly with the Indian stock exchange.

REITs and InvITs do not hold multiple schemes or classes of units. The units are available in Indian Rupees denomination and it is obligatory for the units to be listed on a recognized stock exchange in India.

"Permitting issuance of Depository Receipts against units of REITs and InvITs which are listed on a foreign stock exchange gives foreign investors an opportunity to participate in the units of Indian REITs and InvITs," SEBI said.

On the proposed regulatory framework, the SEBI has sought public comments till 21st February.

SEBI with respect to eligibility criteria proposed that REITs and InvITS will be eligible to issue permissible for the issue of depository receipts, if such trusts, their directors and selling unit holders are not barred from accessing the capital market by SEBI, they should not be a wilful defaulter or a fugitive economic offender.

The existing unit holders would be eligible to transfer permissible securities for the issue of depository receipts under certain conditions.

The copy of the initial documents for DRs issued must be filed by the REITs and InvITs on the back of permissible securities with SEBI and the recognised Indian stock exchange. Further, final documents for such initial issues should also be filed with them for record purposes.

SEBI specified that REITs and InvITs should ensure that any public disclosures made by them on international bourse are following the requirements of the permissible jurisdiction where the DRs are listed. These disclosures must be made with the recognised bourse within 24 hours from the date of filing.