Sebi considers allowing InvITs to include road maintenance costs in NDCF

The Securities and Exchange Board of India (Sebi) is considering a regulatory adjustment that could benefit Infrastructure Investment Trusts operating road projects. According to the announcement, Sebi received a representation from the Bharat InvITs Association requesting clarification on how major maintenance expenses for road infrastructure should be treated when calculating Net Distributable Cash Flow, or NDCF. The proposal specifically addresses the treatment of debt incurred by InvITs to fund these significant maintenance activities and how such expenses should factor into NDCF computations used for determining distributable cash available to investors.

This regulatory consideration holds significance for India's infrastructure financing landscape, where InvITs have emerged as key mechanisms for monetizing completed infrastructure assets and attracting institutional capital. The treatment of maintenance debt directly impacts the cash distributions that InvITs can make to unitholders, influencing investor returns and the attractiveness of these investment vehicles. For the broader market, any clarification on NDCF calculations could reshape how road infrastructure assets are valued and financed, potentially affecting valuations across the InvIT sector and influencing capital allocation decisions by institutional investors. Road infrastructure InvITs represent a substantial portion of India's listed InvIT universe, making this regulatory decision relevant to fixed-income investors, equity holders in these structures, and companies bidding for infrastructure concessions where InvIT-based financing models are considered.

Source: Markets-Economic Times