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Manner of achieving minimum public unitholding – INVITs

Abhishek Kumar
30 Mar, 2024 30 Mar, 2024
Manner of achieving minimum public unitholding – INVITs

A recent circular from the Securities and Exchange Board of India (SEBI) discusses a crucial element of Infrastructure Investment Trusts (InvITs) public ownership. It concerns how these Trusts should fulfil their minimal public unitholding obligations in particular. According to the SEBI (Infrastructure Investment Trusts) Regulations, 2014, any listed InvITs must increase the public unitholding to at least 25% within three years of the date the units were listed as part of an initial offer.

SEBI published Circular No. SEBI/HO/DDHS/PoD2/P/CIR/2023/106 on June 27, 2023, provide a detailed analysis of how Real Estate Investment Trusts (INvITs) might meet the required minimum public unitholding. This new regulation represents a substantial update for all REITs, parties to the REIT, and recognized stock exchanges.

Achieving Minimum Public Unitholding

Similar to the rights issue, the parties would forego any potential claim to units that would result from a bonus issue.

  • Allotment of Units Under Institutional Placement: This strategy focuses on institutional investors exclusively.
  • Open Market Sales: Subject to the precise restrictions and conditions outlined in the circular, the parties may sell up to a specified portion of the InvIT’s total paid-up unit capital in the open market.
  • Transfer of Units to an ETF: This requires moving up to 5% of the InvIT’s paid-up unit capital to an ETF run by a mutual fund that has registered with SEBI.
  • Any Additional Techniques Approved by the Board: This gives room for flexibility, allowing an investment manager to suggest different ways to satisfy public unitholding obligations. Every quarter, the Stock Exchanges will check to see if InvITs are using these measures, and they will notify SEBI of any non-compliance.
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Role of Stock Exchange

The SEBI has asked stock exchanges to keep an eye on the tactics REITs1 and InvITs employ to increase the number of publicly traded units they own. If the regulator determines the bourse needs to adhere to the system more strictly, a quarterly report will be submitted.

Stock exchanges play a critical role in ensuring that these rules are followed, and they are responsible for reporting any infractions to SEBI every three months.

Conclusion

The circular demonstrates SEBI’s dedication to upholding transparency and making sure that Infrastructure Investment Trusts have a fair public ownership structure. By providing a range of options for achieving minimum public unitholding, SEBI gives InvITs the freedom to select the best solution that complements their corporate objectives. The Stock Exchanges’ function as monitors further emphasise the significance of regulatory compliance in this case. The new circular represents a significant step towards creating a more welcoming and stable climate for infrastructure investment in India.

Frequently Asked Questions

What is the Sebi circular for achieving minimum public shareholding?

For entities that have listed their equity shares on the stock exchange, Regulation 38 of SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015 read with Rule 19(2)(b) and Rule 19A of Securities Contract Regulation Rules 1957 makes it mandatory to maintain a minimum public shareholding of 25%.

What is minimum public shareholding rule 19?

Prior to the Amendment, sub-rule (6) of Rule 19A stipulated that the Central Government may, in the public interest, exempt any listed public sector business from the restrictions of Rule 19A. Rule 19A of the SCR Rules mandates listed companies to maintain a minimum public shareholding of at least.

What is the minimum of public holdings in initial public offer?

60% of the size of a problem. For all listed firms, a minimum threshold level of public holding will be 25%.

What is the minimum public float requirement?

At the moment, all listed businesses are required to keep an MPS of 25% under market laws. Newly listed companies have three years to reach the 25% public float criteria. The deadline for 25% MPS to give five years had been lowered by Sebi for issuers with post-issue market caps of over $1 trillion.

Manner-of-achieving-minimum-public-unitholding-–-INVITs

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References

  1. https://en.wikipedia.org/wiki/Real_estate_investment_trust

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