Market regulator SEBI has drastically cut the lot size for trading of units of privately placed InvITs on designated stock exchanges to ₹ 25 lakhs from ₹ 1 crore.
This measure is expected to help increase the liquidity of privately placed InvIT units by allowing a broader base of investors to participate in the market and promote diversification of investment portfolios, enabling them to better manage risk, say industry experts.
The latest relaxation is part of slew of changes now implemented by SEBI to its existing SEBI (Infrastructure Investment Trusts) Regulations 2014.
A SEBI Consultation paper issued in May this year had among other things proposed reduction of trading lot for privately placed InvITs to ₹ 25 lakhs.
Prior to the latest changes, the trading lot for secondary market trading for privately placed InvITs is set at ₹ 1 crore. Further, if the InvIT invests atleast eighty percent of its asset value in completed and revenue generating assets, the said trading lot is ₹ 2 crore (instead of ₹ 1 crore).
As of end March 2024, there were 19 SEBI registered InvITs with assets to tune of ₹ 5.42 lakh crore. The number of registered REITs stood at four with aggregate asset value of ₹ 1.40 lakh crore.
Vishal Gherana - Principal Associate - Karanjawala & co, said that the latest amendment to SEBI InvIT regulation is a pivotal shift towards fostering greater trust and transparency in the sector.
“The introduction of a ₹ 25 lakh trading lot strikes a balance by enhancing liquidity while ensuring that serious investors remain the key participants”, Gherana said.
Separate Amendments
Additionally, SEBI has now implemented separate amendments to both its regulations on InvITs and real estate investment trusts (REITs) to reduce the compliance burden and facilitate ease of doing business.
SEBI has now fixed the time for undertaking distributions to unitholders by the REIT and InvIT to five working days from the date of declaration.
The move is expected to bring efficiency to the distribution process and will aid in making funds available to investors within a relatively shorter period of time.
The market regulator has provided flexibility to the manager/ investment manager of REIT/InvIT to fix record dates. Moreover, they should intimate the record date to the stock exchange at least two working days in advance.
Also, it has allowed REITs and InvITs to call a unitholders’ meeting with less than 21 days’ notice.
Broader participation
SEBI’s emphasis on facilitating broader participation through electronic voting and video conferencing ensures that every unit holder, regardless of location, can actively engage in decision-making, Gherana added.
Aayush Mohata, Partner, Khaitan & Co, said “With these amendments, the securities market regulator aims to modernize the regulatory framework for REITs and InvITs in India, making it easier for investors to participate in management decisions”.
Key changes address long-standing needs, such as allowing unitholder meetings to be convened with shorter notice periods and clarifying approval thresholds for unitholder resolutions, Mohata added.
Additionally, the amendments enable unitholder meetings to be conducted via video conferencing with remote voting options.
SEBI has also recognized the importance of data protection, mandating adequate electronic data storage, business continuity plans, and disaster recovery systems, Mohata added.