Sebi Proposes New Norms for Public Issue of REITs

New Delhi: To provide new avenues for raising funds, the Securities and Exchange Board of Idnia (Sebi) on Thursday proposed fresh norms for the public issue of real estate investment trusts (REITs), including a cap of 75 per cent allocation to institutional buyers.

Capital market regulator Sebi said the proposed norms for the public issuance of REITs relate to appointment of merchant bankers, disclosures in the offer documents and filing of draft papers, keeping them in the public domain for at least 21 days.

For an issue made through the book building process or otherwise, the allocation in the public issue should be maximum 75 per cent to qualified institutional buyers (QIBs) and at least 25 per cent to other investors, Sebi said.

An investment manager can allocate up to 60 per cent of the portion available for allocation to QIBs to anchor investors, subject to certain conditions.

An anchor Investor should make an application for at least Rs 10 crore in the public issue and allocation to such investors should be on a discretionary basis and subject to the minimum of two investors for allocation up to Rs 250 crore and five such investors for over Rs 250 crore.

Issuing the draft paper, Sebi said that REITs will need to deposit, before the opening of subscription, and keep deposited with the stock exchange, an amount calculated at the rate of 0.5 per cent of the amount of units offered for subscription to the public.

The issue would need to be opened after at least three working days from the date of filing the offer document with Sebi. Besides, the issue would need to be kept open for at least three working days but not more than 30 days. The investment manager may issue advertisements for issue opening and closing advertisements, Sebi said.

The final norms would be put in place after taking into account public comments, which have been invited till January 15.

The regulator also said that any public communication including advertisement, publicity material and research reports concerned with the issue should not contain any matter extraneous to the contents of the offer document.

Sebi also said that no REITs can make a public issue of units if it or any of its sponsors, investment manager or trustee is debarred from accessing the capital market by Sebi.

The restriction will also apply for promoter, director or person in control of any other company or a sponsor, investment manager or trustee of any other REIT or REIT that is debarred from market by Sebi, as also in the case of wilful defaulters identified by the Reserve Bank.

Besides, public issue can’t be launched if REIT is in default of payment of distributions to the unit holders in accordance with the Sebi norms for a period of more than six months.

No person connected with the issue can offer any direct or indirect incentive “in any manner, whether in cash or kind or services or otherwise to any person for making an application for allotment of units”.

However, this would not apply to fees or commission for services rendered in relation to the issue.

No REIT should alter the terms of the issue, which may adversely affect the interests of the holders of that units unless a resolution to that effect is passed at a meeting of the unit holders.

In September last year, Sebi had notified norms for listing of business trust structures, REITs and InvITs that would help attract more funds in a transparent manner into realty and infrastructure sectors.