Description

SEBI specifies permissible uses of borrowings above 49% of InvIT asset value under amended Regulation 20(3)(b)(ii), including capex, major road maintenance, and debt refinancing, effective immediately.

Summary

SEBI has issued a circular clarifying the permissible uses of fresh borrowings for Infrastructure Investment Trusts (InvITs) when their net borrowings exceed forty-nine percent of the value of InvIT assets. This follows an amendment to Regulation 20(3)(b)(ii) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014, made on April 17, 2026. The circular is effective immediately.

Key Points

  • Regulation 20(3)(b)(ii) of SEBI (InvIT) Regulations, 2014 was amended on April 17, 2026 to expand permissible borrowing uses above the 49% threshold.
  • Three categories of use are now explicitly permitted for borrowings exceeding 49% of InvIT asset value.
  • The circular applies to all InvITs, all parties to InvITs, all depositories, and all recognized stock exchanges.
  • Recognized stock exchanges are directed to publish this circular on their websites.

Regulatory Changes

Under the amended Regulation 20(3)(b)(ii), the following are now recognized as permissible uses of borrowings above 49% of InvIT asset value:

  1. Capital Expenditure (Capex): Expenditure made to enhance asset performance or for capacity augmentation.
  2. Major Maintenance for Road Projects: Expenditure on non-routine maintenance of road projects in accordance with the concession agreement. “Road Project” is defined as a project in the ‘Roads and bridges’ infrastructure sub-sector per the Ministry of Finance notification dated September 19, 2025, including subsequent amendments.
  3. Refinancing of Debt: Refinancing by the InvIT, SPV, or Holdco, subject to two conditions:
    • The original debt being refinanced must have been used for purposes permitted under Regulation 20(3)(b)(ii).
    • Only the principal portion of debt may be refinanced; accumulated interest, charges, or fees cannot be refinanced.

Compliance Requirements

  • InvITs: Must ensure that any fresh borrowings exceeding the 49% net borrowing threshold are utilized only for the three permissible categories listed above.
  • SPVs and Holdcos: Refinancing transactions must comply with the conditions specified — original debt must have been used for permitted purposes, and only principal may be refinanced.
  • Recognized Stock Exchanges: Must disseminate the contents of this circular on their websites.
  • All Parties: Must align borrowing and financing activities with the updated regulatory framework immediately.

Important Dates

  • April 17, 2026: Amendment to Regulation 20(3)(b)(ii) of SEBI (InvIT) Regulations, 2014.
  • September 19, 2025: Ministry of Finance notification defining the ‘Roads and bridges’ infrastructure sub-sector.
  • May 15, 2026: Date of this circular; provisions come into force with immediate effect.

Impact Assessment

This circular provides regulatory clarity for InvITs operating with higher leverage ratios, particularly those in the infrastructure and roads sector. By explicitly permitting capex for capacity augmentation, major road maintenance, and debt refinancing above the 49% threshold, SEBI enables InvITs to better manage large, lumpy capital expenditures inherent to infrastructure assets without breaching regulatory limits. The refinancing restriction — limiting it to principal only — protects unitholders from compounding of interest liabilities. Overall impact on the broader market is moderate; the circular primarily affects InvIT managers, their SPVs and Holdcos, and institutional investors in InvIT units.

Impact Justification

Directly affects InvIT borrowing flexibility above the 49% threshold; provides operational clarity for infrastructure trusts but does not broadly affect equity markets or listed stocks.