Markets regulator SEBI revises Infrastructure Investment Trust (InvIT) rules to permit certain debt-funded road maintenance expenses to be included in calculations of net distributable cash flow (NDCF). The regulator says the change gives InvITs more flexibility in meeting major maintenance requirements while aiming to avoid a reduction in cash available for distribution to unitholders.
Under SEBI’s revised framework, major maintenance payments for road projects funded through external debt can be added back to NDCF both at the special purpose vehicle (SPV)/holding company level and at the trust level. SEBI also requires InvITs to obtain unitholder approval before raising such debt for major maintenance expenses, with approval needed for each project unless it is covered by a one-time approval for debt already availed or proposed over the project life cycle, or for a specific expense.
SEBI further sets disclosure and audit requirements. InvITs must disclose relevant project details, categories and estimated major maintenance expenses, and potential impacts on future growth and distributions. A statutory auditor must certify that the expenses align with the concession agreement and are funded through external borrowings, and InvITs must separately report the related borrowing and its maturity profile. The changes take effect immediately, with restrictions on distributions funded by external debt in other cases.
