Advertisement
What really powers the cloud? Behind every Google search, A...
A lot of what defines a home isn’t visible at handover. I...
Private equity has played a significant role in shaping Indi...
Luxury real estate is one of the most talked-about segments ...
Airports play a much bigger role than just enabling travel -...
• Sebi has proposed amendments to the net distributable cash flow (NDCF) framework applicable to Infrastructure Investment Trusts (InvITs) operating road assets.
• The proposal seeks to address the treatment of large maintenance expenditures that are periodically incurred during the lifecycle of highway projects.
• Road-sector InvITs may be allowed to adjust certain debt-funded maintenance costs while calculating distributable cash flows, subject to investor approval and disclosure requirements.
• The market regulator has invited stakeholder feedback before finalising the proposed changes.
The Securities and Exchange Board of India (Sebi) has initiated a consultation on potential changes to the regulatory framework governing Infrastructure Investment Trusts (InvITs), proposing a revised treatment for major maintenance expenditure incurred by trusts operating road and highway assets.
The proposal aims to address a long-standing issue faced by road-focused InvITs, where substantial maintenance interventions are required periodically to preserve asset quality and operational standards. Such expenditures can significantly affect reported distributable cash flows during the years in which they are incurred, despite being part of the normal lifecycle management of infrastructure assets.
Road projects under concession agreements often require extensive resurfacing, rehabilitation and structural maintenance at specified intervals. These expenditures are generally larger than routine operating costs and can create fluctuations in cash flow available for distribution to unitholders. Industry participants have argued that the existing framework does not fully reflect the financing structure of such maintenance programmes, particularly when the spending is supported through borrowings.
In response to representations received from market participants, Sebi has proposed allowing road-sector InvITs to add back certain major maintenance expenses while calculating Net Distributable Cash Flow (NDCF), provided specific conditions are met. The regulator has indicated that the relaxation would be limited to eligible expenditure funded through debt and would not constitute a blanket exemption from existing distribution norms.
The proposed framework seeks to balance operational realities of infrastructure asset management with investor protection requirements. Under the consultation paper, InvITs intending to adopt the revised treatment would be required to obtain approval from unitholders and provide detailed disclosures regarding the nature of maintenance activities, project-level expenditure estimates and the funding arrangements being used.
Sebi has also proposed enhanced transparency measures to ensure investors are fully informed about the financial implications of such borrowing. These disclosures are expected to include details of maintenance schedules, debt obligations and the potential impact on future project cash flows. Independent certification and audit requirements may also form part of the compliance framework.
The consultation reflects the growing importance of InvITs as a financing vehicle for India's infrastructure sector. Road assets constitute a significant portion of the InvIT market, with several operational highway portfolios having been monetised through the structure in recent years. As these assets mature, maintenance expenditure is becoming an increasingly important consideration in cash flow management and investor distributions.
By examining changes to the NDCF framework, Sebi is seeking to create a regulatory approach that recognises the unique operational characteristics of long-term road concessions while maintaining adequate safeguards for investors. The regulator has invited comments from stakeholders before taking a final view on the proposed amendments.
If implemented, the changes could provide road InvITs with greater flexibility in managing periodic maintenance cycles without creating significant distortions in distributable cash flow calculations, while continuing to ensure transparency and investor oversight.
Source PTI
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
