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Capital markets regulator SEBI has proposed to allow Infrastructure Investment Trust (InvIT) to invest in holding companies, which in turn, invests in other special purpose vehicles (SPVs).
Infrastructure assets in India are usually held by different SPVs, where the promoters of such SPVs create separate holding companies (holdcos) which in turn hold stake in the underlying SPVs. A large proportion of the infrastructure projects in India are financed by Indian financial institutions on a project finance basis where lenders require a pledge on the shares of the SPV.
According to the current regulations, InvITs can hold infrastructure assets either directly or through an SPV, in which the InvIT holds controlling stake. In such cases, if the SPV is held directly by the InvIT, the lenders would want pledge of SPV shares held by the InvIT. This might not be attractive for InvIT investors.
The industry had made a representation on amending the regulations to make InvITs more attractive.
In a consultation paper on Thursday, SEBI said the two-level structure would be subject to the condition that the InvIT shall hold controlling interest and not less than 50 per cent equity stake or interest in the holding company. In turn, the holding company would hold controlling interest and at least 50 per cent equity stake or interest in the underlying SPV.
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