SEBI Proposes Relaxation in NDCF Calculation for InvITs

Draft Circular; Dated: 01.06.2026

The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing relaxation in the framework for computation of Net Distributable Cash Flows (NDCF) for Infrastructure Investment Trusts (InvITs).

The proposal seeks to address the treatment of Major Maintenance (MM) expenses incurred in road projects and their impact on distributable cash flows.

1. Proposal to Add Back Debt-Funded Major Maintenance Expenses

SEBI has proposed that payments made towards Major Maintenance (MM) expenses for road projects may be added back while computing NDCF, provided such expenses are funded through external debt and subject to specified conditions.

The proposed change is intended to ensure that significant maintenance expenditures do not disproportionately reduce distributable cash flows where such expenditures are financed through borrowings.

2. Existing Treatment of Major Maintenance Expenses

Under generally accepted accounting principles, Major Maintenance expenses are treated as operating expenses.

As a result, such expenditure is deducted while computing cash flows and profitability metrics, which may affect the amount available for distribution by InvITs.

3. Nature of Major Maintenance Expenditure

SEBI has observed that Major Maintenance expenditure differs from routine maintenance activities.

Major Maintenance generally refers to expenditure incurred on a road project that:

• Goes beyond regular or routine maintenance;
• Is substantial in value over the life of the asset;
• Is necessary to maintain the operational life of the road project; and
• Is required to comply with obligations and specifications under the concession agreement.

4. Rationale Behind the Proposal

The regulator has noted that Major Maintenance expenses for road projects are often significant and essential for preserving asset quality and contractual compliance.

Where such expenditure is financed through external debt, immediate reduction of distributable cash flows may not accurately reflect the economic position of the InvIT.

Accordingly, the proposal seeks to provide a more balanced treatment of such expenditures in NDCF calculations.

5. Impact on InvIT Cash Flow Distribution

If implemented, the proposal may:

• Increase distributable cash flows available to unitholders;
• Align NDCF computation more closely with financing realities of infrastructure assets;
• Reduce volatility in distributions arising from large maintenance cycles; and
• Improve cash flow management for road-sector InvITs.

6. Public Comments Invited

SEBI has invited comments and suggestions from stakeholders on the proposal.

Comments may be submitted up to 22 June 2026.

7. Objective of the Proposal

The proposal aims to refine the NDCF framework for InvITs by recognising the unique nature of Major Maintenance expenditure in road projects.

By permitting debt-funded Major Maintenance payments to be added back while computing NDCF, SEBI seeks to improve the representation of distributable cash flows while maintaining prudential safeguards and investor protection.

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