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The Securities and Exchange Board of India (SEBI) has proposed revisions to financial disclosure norms for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These changes, aimed at enhancing transparency and investor protection, require REITs and InvITs to provide detailed financial statements in their offer documents, regardless of their operational tenure. Additionally, SEBI suggests removing the option of condensed financial statements and making quarterly reporting on fund utilisation mandatory. The net borrowing ratio must also be disclosed in financial reports. Public feedback on these proposals has been invited, with submissions open through an online platform till March 7.
The Securities and Exchange Board of India (SEBI) has introduced a draft circular proposing changes to financial disclosure norms for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These updates align financial reporting for these entities with the disclosure and listing norms applicable to public issues. Advertisement
SEBI stated that the proposed revisions stem from recommendations by the Working Group on Ease of Doing Business for REITs and InvITs, inputs from the Indian REITs Association and Bharat InvITs Association, and internal discussions. The changes cover ease-of-doing-business (EoDB) and investor-protection measures.
Under the new framework, REITs and InvITs will be required to present combined financial statements in their initial public offerings (IPOs), irrespective of their operational history. These investment vehicles, which pool funds from investors to invest in real estate and infrastructure projects, are publicly listed, allowing investors to trade their shares.
For follow-on offerings, SEBI mandates the submission of audited consolidated financial statements, with links to individual audited reports published on their respective websites. To further strengthen investor protection, SEBI plans to eliminate the option of providing condensed financial statements, thereby ensuring full financial disclosure in accordance with SEBI's ICDR (Issue of Capital and Disclosure Requirements) and LODR (Listing Obligations and Disclosure Requirements) norms. Condensed financial statements refers to a summary of a company's financial performance and is presented in less detail than complete financial statements.
The regulator proposes quarterly rather than half-yearly reporting of deviations in the utilisation of funds raised through debt securities. REITs and InvITs will also need to disclose their net borrowing ratio (i.e., how much debt they have relative to their assets) in their financial reports. This will help investors understand the financial health of the trust, especially if there are any borrowings.
Additionally, the regulator proposed that REITs and InvITs will be required to disclose combined financial statements for initial public offerings, irrespective of their operational tenure.
To refine these proposals, SEBI has sought public comments on the matter, with feedback submissions open via an online portal till March 7.
SEBI's proposed regulatory changes are designed to enhance transparency and ensure better financial disclosure by REITs and InvITs. This would strengthen investor confidence and they will be able to make more informed decisions.
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