SEBI proposes overseas listing route for REITs and InvITs through depository receipts

MUMBAI, 6 AUGUST: SEBI has proposed allowing Real Estate Investment Trusts (REITs) and publicly listed Infrastructure Investment Trusts (InvITs) to issue depository receipts (DRs) in permitted overseas jurisdictions. The market regulator has circulated a consultation paper seeking public comments on the proposed regulatory framework.

The move is aimed at providing an additional investment avenue to foreign investors and attracting overseas capital into Indian REITs and InvITs. Depository receipts are foreign currency-denominated instruments issued by a foreign depository against securities deposited with a domestic custodian in India. These instruments can be listed and traded on permitted international exchanges.

Currently, units of Indian REITs and InvITs are denominated in rupees and listed on recognised stock exchanges in India. While foreign investors can invest directly in these units, the proposed framework will allow them to gain exposure through instruments traded in foreign currency overseas.

SEBI said, “It will be beneficial for foreign investors, as DRs allow trading in foreign currency on the permitted international exchange(s). It will also help in attracting foreign capital in REITs and InvITs.”

Privately listed InvITs to remain outside the framework

As per the circular, the proposed facility will be available only to REITs and publicly listed InvITs. SEBI has proposed excluding privately listed InvITs from the framework. Privately listed InvITs have a trading ticket size of Rs.25 lakh and can issue units through an initial offer only to institutional investors and body corporates.

According to SEBI, similar investor eligibility and minimum trading restrictions may not be enforceable on depository receipts issued and traded in overseas jurisdictions. Consequently, the regulator has not proposed extending the facility to privately listed InvITs.

Existing rules permit DRs, but enabling provisions are absent

Units issued by REITs and InvITs qualify as securities under the Securities Contracts (Regulation) Act, 1956. The Depository Receipts Scheme, 2014 and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 also permit depository receipts to be issued against instruments in which overseas investors are allowed to invest. However, the existing SEBI regulations governing REITs and InvITs do not contain an enabling provision or a corresponding operational framework for issuing depository receipts against their units.

To address this gap, SEBI has proposed inserting enabling provisions in the REIT and InvIT regulations. The proposed provision states that depository receipts may be issued against units of a REIT or publicly offered InvIT, subject to the applicable regulations and the manner specified by SEBI.

(Disclaimer: The information provided here is investment advice only. Investing in the markets is subject to risks and please consult your advisor before investing.)

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