Regulation 18 - Investment conditions and dividend policy - Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014

CHAPTER V INVESTMENT CONDITIONS, RELATED PARTY TRANSACTIONS, BORROWING AND VALUATION OF ASSETS Investment conditions and dividend policy 18. (1) The investment by an InvIT shall only be in 1 [holdco and/ or] 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 2 [holdco and/ or] 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 3 [exercise] any rights that prevents the InvIT from complying with the provisions of these regulations and an agreement 4 [has been] entered into with such shareholders or partners to that effect prior to investment in the SPV: 5 [Provided that the shareholders 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.] (b) in case the SPV is a company 6 [/LLP], the investment manager, in consultation with the trustee, shall appoint 7 [majority of] the board of directors or governing board of such SPVs 8 [as applicable]; (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. 9 [(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 10 [exercise] any rights that prevent the InvIT, the HoldCo or the SPV(s) from complying with the provisions of these regulations and an agreement 11 [has been] entered into with such shareholders or partners to that effect prior to investment in the holdco/SPV: 12 [Provided that the shareholders 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.] (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); 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) 13 [ 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.] (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 14 [InvIT] the 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 15 [holdco and/ or] SPV 16 [(s)], whether by way of equity or debt or equity linked instruments or partnership interest, only the portion of direct investments in 17 [completed and revenue generating] projects by such 18 [holdco and/ or SPV(s)] 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 19 [InvIT] assets, 20 [***] shall be invested in, (i) under-construction infrastructure projects, whether directly or through 21 [holdco and/ or] SPVs: Provided that investment in such assets shall not exceed ten per cent. of the value of the 22 [InvIT assets]; (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 23 [holdco and/ or SPV(s)]; (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. 24 [(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 therafter.] (6) With respect to distributions made by the InvIT and the 25 [holdco and/or] SPV,- (a) not less than ninety per cent. of net distributable cash flows of the SPV shall be distributed to the InvIT 26 [/holdco] 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; 27 [(ba) with regard to distribution of net distributable cash flows by the holdco to the InvIT, the following shall be complied: (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. ] 41 [ (c) such distributions shall, (i) be declared not less than once every six months in every financial year in case of publicly offered InvITs; (ii) be declared not less than once every financial year in case of privately placed InvITs; and (iii) shall be made within five working days from the record date. Explanation . For the purpose of above clause, record date for the payment of distribution shall be two working days from the date of the declaration of distribution, excluding the date of declaration and the record date. ] (d) subject to 28 [sub-] clause (c), such distribution shall be 29 [***] in the manner as mentioned in the offer document or placement memorandum. 37 [ (e) any amount remaining unclaimed or unpaid out of the distributions declared by a InvIT in terms of sub-clause (c), shall be transferred to the Investor Protection and Education Fund constituted by the Board in terms of section 11 of the Act, in such manner as may be specified by the Board 38 [ : ]] 39 [ Provided that the amount transferred to Investor Protection and Education fund shall not bear any interest. ] 40 [ (f) the unclaimed or unpaid amount of a person that has been transferred to the Investor Protection and Education Fund in terms of sub-clause (e), may be claimed in such manner as may be specified by the Board. ] (7) If any infrastructure asset is sold by the InvIT or 30 [holdco or] SPV or if the equity shares or interest in the 31 [holdco/] SPV are sold by the InvIT, (a) if the InvIT 32 [***] 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 33 [***] proposes not to invest the sales proceeds into any other infrastructure asset 34 [within a period of one year], it shall be require to distribute the same in accordance with sub-regulation (6). (8) If the distributions are not made within 42 [ the timeline specified in clause (c) of sub-regulation (6) ] , 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 35 [other than the holdco/ SPV(s) in which the InvIT has invested in]: 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 36 [holdco and/or] 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. *************** NOTES:- 1 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 2 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 3 Substituted for the word have by the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018. 4 Substituted ibid for the words shall be . 5 Inserted by the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018. 6 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 7 Substituted for not less than one authorized representative on by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 8 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 9 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 10 Substituted for the word have by the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018. 11 Substituted ibid for the words shall be . 12 Inserted by the Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2018, w.e.f. 10.04.2018. 13 Substituted for In case of InvIT as specified under sub-regulation (2) of regulation 14, the InvIT shall invest only in eligible infrastructure projects or securities of companies or partnership interests of LLPs in infrastructure sector: Provided that un-invested funds may be invested in liquid funds or government securities or money market instruments or cash equivalents. Explanation.- Companies or LLPs in infrastructure sector shall mean those companies or LLPs 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. by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 14 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 15 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 16 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 17 Substituted for eligible infrastructure by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 18 Substituted for SPVs by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 19 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 20 Omitted proportionate to the holding of the InvITs, by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 21 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 22 Substituted for assets of the InvIT by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 23 Substituted for SPV by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 24 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 25 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 26 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 27 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 28 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 29 Omitted as per the dates and by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 30 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 31 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 32 Omitted or SPV by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 33 Omitted or SPV by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 34 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 35 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 36 Inserted by Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2016, w.e.f 30.11.2016 37. Inserted vide Notification No. SEBI/LAD-NRO/GN/2023/122 dated 14-02-2023 38. Substituted vide Notification No. SEBI/LAD-NRO/GN/2023/159 dated 20-10-2023 before it was read as, . 39. Inserted vide Notification No. SEBI/LAD-NRO/GN/2023/159 dated 20-10-2023 40. Inserted vide Notification No. SEBI/LAD-NRO/GN/2023/159 dated 20-10-2023 41. Substituted vide Notification No. SEBI/LAD-NRO/GN/2024/207 dated 26-09-2024 w.e.f. sixtieth day from the date of its publication in the Official Gazette​​​​​​​ before it was read as, (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; 42. Substituted vide Notification No. SEBI/LAD-NRO/GN/2024/207 dated 26-09-2024 w.e.f. sixtieth day from the date of its publication in the Official Gazette​​​​​​​ before it was read as, fifteen days of declaration