SEBI Slashes Cooling-Off Period for Illiquid Private Listed InvITs
SEBI reduces the cooling-off period to 8 weeks for OFS of illiquid private listed InvITs to boost ease of doing business.
In a strategic move to enhance the ease of doing business, the Securities and Exchange Board of India (SEBI) has announced a significant reduction in the cooling-off period for the Offer for Sale (OFS) of units of illiquid private listed InvITs. The market regulator has trimmed this period to eight weeks, a decision that comes into immediate effect.
This regulatory shift is a direct response to feedback gathered from various market participants who sought a more streamlined process for handling infrastructure investment trusts that suffer from low liquidity in the market.
Boosting Market Liquidity and Ease of Business
The revised framework specifically targets private listed Infrastructure Investment Trusts (InvITs) whose units are deemed illiquid. By reducing the cooling-off period to eight weeks, SEBI aims to make the exit and entry process more efficient for stakeholders involved in these specialized investment vehicles.
This update has been integrated into the existing OFS framework, which governs how units of both Real Estate Investment Trusts (REITs) and InvITs are sold via stock exchange mechanisms.
Key Details of the Revised Framework
While the cooling-off period has been reduced, SEBI has maintained several core parameters to ensure market stability:
- Applicability: The broader OFS framework that applies to the equity shares of listed companies will also extend to the sale of REIT and InvIT units, provided certain conditions are met.
- Trading Lots: For InvITs, the trading lot will remain unchanged, adhering to the existing lots applicable in the secondary market as per the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
- Retail Investor Exemption: SEBI has clarified that the general OFS framework's provisions regarding retail investors will not apply to OFS transactions involving private listed InvITs.
- Offer Duration: These specific offers will be highly time-bound, remaining open for only one day—specifically, the trading day on which the offer is made.
Regulatory Updates and Implementation
The change modifies paragraph 19.2 under Chapter 1 of the SEBI Master Circular dated December 30, 2024, which serves as the comprehensive guide for the OFS of shares, including REITs and InvITs.
To ensure a smooth transition, SEBI has issued directives to all recognized stock exchanges. The exchanges are required to:
- Implement the necessary technical systems to support these changes.
- Amend their respective bye-laws, rules, and regulations to align with the new mandate.
- Inform all market participants and investors about the revised provisions.
- Publish and disseminate the official circular on their websites for public transparency.