SEBI on January 10, 2023, vide Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/10 specified the Comprehensive Framework on Offer for Sale (‘OFS’) of shares through Stock Exchange Mechanism (‘Framework’). The Framework in paragraph B provided for OFS Framework for sale of units of Real Estate Investment Trusts (‘REITs’) and Infrastructure Investment Trusts (‘InvITs’), wherein it permitted OFS for sale of units of publicly issued and listed REITs and InvITs by sponsor(s) or sponsor group entities, and other unit holders and stated that the OFS framework for REITs and InvITs shall be equivalent to the OFS framework suggested for equity shares of the listed company.  

SEBI on August 3, 2023, vide Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/134 (‘Circular’) modified the paragraph B of the Framework to allow OFS for units of private listed InvITs. It provides that in case of OFS for listed InvITs, the trading lot will remain the same as the lot prescribed for such InvITs in the secondary market, as per the SEBI (Infrastructure Investment Trusts) Regulations, 2014. It further provides that provisions related to retail investors as specified in paragraph A of the Framework shall not be applicable in case of OFS for such InvITs and that the OFS shall remain open for one day (i.e., T day). 

Through this amendment SEBI has allowed the sponsors, sponsor group entities and other unit holders of private listed InvITs to sell their units to the public through a stock exchange mechanism which was previously restricted to publicly issued and listed units. This decision was made based on the feedback received from the market participants to allow OFS for units of private listed InvITs and to make it convenient for all kinds of listed InvITs to sell units though the exchange.

Earlier the paragraph B read as:  

“OFS Framework for sale of units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs):

1.0 OFS for sale of units of REITs and InvITs by sponsor(s) or sponsor group entities, and other unitholders shall be permitted only in publicly issued and listed REITs and InvITs. The OFS framework for REITs and InvITs shall be equivalent to the OFS framework prescribed at paragraph-A above for equity shares of listed companies.”

The amended paragraph B reads as:  

“OFS Framework for sale of units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs):

1.0 OFS for sale of units of REITs and InvITs by sponsor(s) or sponsor group entities, and other unitholders are permitted only in units of listed REITs and listed InvITs. The OFS framework for REITs and InvITs shall be equivalent to the OFS framework prescribed at paragraph-A above for equity shares of listed companies.

Provided that in case of OFS for listed InvITs, the trading lot shall be same as the trading lot prescribed for such InvITs in the secondary market in terms of SEBI (Infrastructure Investment Trusts) Regulations, 2014.

Provided further that since there is no participation of retail investors in private listed InvITs, the provisions related to retail investors as specified in paragraph-A above shall not be applicable in case of OFS for such InvITs and the OFS shall remain open only for one day (i.e., T day).”

The circular further advised all recognized stock exchanges to take necessary steps, make necessary amendments and put in place necessary systems for implementation of the above. 

Please find attached a copy of the Circular.

This update has been contributed by Rachika Agrawal Sahay (Partner) and Sirisha Prasad (Associate).

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