SEBI Update: Proposed Framework for Fast-Track Follow-on Offerings by REITs and InvITs

On Thursday, February 20, 2025, the capital market regulator, the Securities and Exchange Board of India (SEBI) proposed a new framework for InvITs. The proposed framework streamlines the process of fast-track follow-on offerings by real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in order to make fundraising more efficient.

Proposal by SEBI

The proposal also includes a 3-year lock-in period for 15% of the preferentially issued units of REITs and InvITs that are allotted to sponsors. Additionally, the remaining units allocated to sponsors would be subject to a one-year lock-in period, starting from the date when trading approval is granted for the units.

For follow-on offers, SEBI stated that a REIT or InvIT must apply to all stock exchanges where its units are listed and seek in-principle approval for listing on these exchanges. The entity must also select one exchange as the designated stock exchange.

Moreover, the minimum public unitholding requirement would be set at 25% of the total outstanding units of the REIT/InvIT on a post-issue basis.

SEBI said 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 public issue, rights issue, preferential issue, institutional placement or otherwise, except pursuant to a unit-based employee benefit 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

About REITs and InvITs

REITs are companies that own or finance real estate properties and provide a way for individuals to invest in real estate without directly owning physical properties. REITs allow individuals to invest in a diversified portfolio of properties, such as office buildings, apartments, shopping centres, and hotels, by buying shares of the REIT.

InvITs are investment instruments that allow individuals to invest in infrastructure projects in India, such as roads, highways, power distribution networks, and telecom towers. They work similarly to mutual funds, pooling money from various investors to invest in income-generating infrastructure assets.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in securities market are subject to market risks, read all the related documents carefully before investing.