SEBI mulls framework for fast track follow-on offer by REITs, InvITs

Markets regulator SEBI on Thursday proposed a framework for undertaking fast-track follow-on offers by REITs and InvITs to make fundraising more efficient.

Additionally, the regulator has proposed a lock-in provision of three years for the preferential issue of units of REITs (real estate investment trusts) and InVITs (infrastructure investment trusts) allotted to sponsors.

The Securities and Exchange Board of India (SEBI) has sought public comments by March 13 on the proposals.

In its consultation process, SEBI proposed that 15% of the units allotted to sponsors and sponsor groups will be locked in for a period of three years from the date of trading approval granted for the units.

Further, the remaining units allotted to them will be locked in for a period of one year from the date of trading approval granted for the units.

With regards to the follow-on offer, SEBI said that the FPO is one of the mechanisms for raising funds subsequent to the issue of units after the initial public offer.

SEBI proposed that REIT and InvIT making an FPO need to ensure that they made an application to all stock exchanges on which their units are listed and seek in-principle approval for listing their units on such exchanges. They need to choose one of them as the designated stock exchange.

The manager and the merchant bankers should be responsible for obtaining in-principle approval and final listing and trading approvals from the stock exchanges.

The minimum public unitholding should be at least 25% of the total outstanding units of the REIT on a post-issue basis.

"A REIT/InvIT shall not undertake any further issue of units in any manner whether by way of a public issue, rights issue, preferential issue, institutional placement or otherwise, except pursuant to a unit-based employee benefits scheme (if any) during the period between the date of filing of the draft follow-on offer document/follow-on offer document for follow-on offer and the listing of the units or refund of application money," SEBI proposed.

Further, REIT/InvIT should file the draft follow-on offer document, through the merchant banker with the Board, for its observations.

The follow-on offer document, after incorporating the observations of SEBI, will be filed with the regulator and recognized stock exchanges. The merchant banker should, along with the filing of the draft follow-on offer document, furnish a due diligence certificate to SEBI.

Last week, the regulator proposed REITs and InvITs to disclose financial information in their offer documents in line with public issues and listing norms.