Sebi revises InvIT cash flow framework to allow adding back external debt-funded maintenance costs

Markets regulator Sebi on Friday allowed Infrastructure Investment Trusts (InvITs) to add back payments made towards major maintenance expenses for road projects funded through external debt, while calculating net distributable cash flow (NDCF).

The move is aimed at providing greater flexibility to InvITs in managing major maintenance requirements of road projects without reducing the cash available for distribution to unitholders.

Under the revised framework, such expenses can be added back to NDCF at both the special purpose vehicle (SPV)/holding company level and the trust level, Sebi said in its circular.


However, InvITs will have to obtain approval from unitholders before raising debt for major maintenance expenses. The approval will be required for each project for which the investment manager proposes to raise such borrowing.

The regulator said the approval can be obtained on a one-time basis for debt already availed or proposed to be availed over the entire project life cycle, or for a specific major maintenance expense.

Any deviation requiring additional debt will need fresh unitholder approval, Sebi said.

Moreover, InvITs will also have to disclose details of the projects for which such debt is proposed, the categories of major maintenance expenses, estimated expenses and the possible impact on future growth and distributions.

A statutory auditor will have to certify that the maintenance expenses are in line with the concession agreement and have been funded through external borrowings.

InvITs will also have to separately disclose the borrowing raised and outstanding debt for major maintenance expenses in their financial and periodic reports. Their debt maturity profiles will also have to separately highlight such borrowings.

Sebi clarified that no InvIT or SPV can distribute cash flows by raising external debt, except in specified cases. Working capital or overdraft facilities used for treasury or working capital purposes will be excluded if squared off within the quarter.

The revised framework will come into force with immediate effect, Sebi said.