SEBI Prescribes Conditions for Continued SPV Status Under InvIT Regulations

The Securities and Exchange Board of India (SEBI) has issued a circular specifying conditions under Regulation 2(1)(zy)(ii) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014 for continued classification of a Special Purpose Vehicle (SPV) after conclusion or termination of a concession agreement or similar arrangement.

The circular aims to provide regulatory clarity regarding treatment of SPVs held by Infrastructure Investment Trusts (InvITs) after completion of infrastructure projects or expiry of concession arrangements.

1. Conditions for Continued Classification of SPV

SEBI has prescribed that where a concession agreement or similar arrangement relating to an infrastructure project concludes or terminates, the Investment Manager of the InvIT must take specified actions within the prescribed timeline for the SPV to continue to qualify under the regulations.

2. Mandatory Exit or Acquisition Requirement

The Investment Manager is required to undertake either of the following actions within one year:

2.1 Exit From the SPV

The Investment Manager may exit the investment in the SPV through:

• Sale of the SPV
• Liquidation
• Winding-up
• Merger

2.2 Acquisition of a New Infrastructure Project

Alternatively, the SPV may acquire a new infrastructure project within the prescribed period to continue qualifying under the InvIT framework.

3. Computation of the One-Year Timeline

The one-year period shall be calculated from the later of the following events:

• Completion or termination of the concession agreement or similar arrangement;
• Conclusion of pending claims or litigations; or
• Completion of the defect liability period.

This provision is intended to address practical situations where legal disputes or post-completion obligations continue after project completion.

4. Disclosure Requirements in Annual Report

The circular further mandates detailed disclosures in the annual report of the InvIT relating to such SPVs.

The disclosures shall include information regarding:

• Assets and liabilities of the SPV
• Contingent liabilities
• Debt repayment obligations
• Pending litigations or claims
• Proposed exit strategy
• Timelines for exit or acquisition of new infrastructure projects

5. Objective of the Circular

The circular seeks to enhance transparency and provide regulatory certainty regarding treatment of SPVs after expiry or termination of concession arrangements. It also aims to ensure timely restructuring or exit of non-operational SPVs while safeguarding investor interests through enhanced disclosure requirements under the InvIT framework.