On March 12, 2020, the Securities and Exchange Board of India (“SEBI”) issued an informal guidance to India Infrastructure Trust in respect of the following issues under the SEBI (Infrastructure Investment Trust) Regulations, 2014 (“InvIT Regulations”):

1. Whether an entity that acts as an investment manager to an infrastructure investment trust (“InvIT”) is permitted to act as the investment manager to other InvITs set up under the InvIT Regulations?
2. In the event the answer to issue 1 above is in the affirmative, whether the common investment manager if it delegates  the functions (i.e. management and operation) of the InvITs to various sub-committees set up by such investment manager, would be in compliance with regulation 4(2)(e)(v) of the InvIT Regulations that requires the investment manager to an InvIT to have not less than half of its directors (in case of a company) or members of the governing board (in case of a limited liability partnership) as independent, and as persons who are not directors or members of the governing board of an investment manager of any other InvIT?

SEBI answered the first issue in the affirmative and stated that there is no provision in the InvIT Regulations that prevents an investment manager to manage more than 1 (one) InvIT. However, SEBI also referred to regulation 19(4) of the InvIT Regulations that provides that the transaction between 2 (two) or more InvITs with a common investment manager or sponsor shall be deemed to be related party transactions for each of the InvITs and provisions of regulation 19 of the InvIT Regulations shall be applicable and that the sub- regulation shall be applicable if the investment manager or sponsors of InvITs are different, but associates. Therefore, SEBI stated that there can be a common investment manager for more than 1 (one) InvIT provided that they comply with regulation 19(4) of the InvIT Regulations.

With regard to the second issue, SEBI stated that it may be interpreted that regulation 4(2)(e)(v) of the InvIT Regulations regarding independent directors in case of a company or independent members of the governing board in case of a limited liability partnership in an investment manager not being directors or members of the governing board in an investment manager of another InvIT, may not be applicable in case of a single entity acting as investment manager to multiple InvITs.

Read the informal guidance here.

This update has been contributed by Adity Chaudhury (Partner) and Deeya Ray (Associate).