The InvITs industry with ₹7 lakh crore of assets under management is seeking M&A-friendly guidelines from regulators for the asset class to be able to attract more investors, several industry executives said.
Their request is that guidelines for change of control transactions involving InvITs should have parity with market regulator Sebi’s open offer guidelines, they said.
In the case of change of control in a listed company wherein an acquirer picks up a 25% stake or more from an existing promoter, the acquirer needs to make a further offer to buy up to 26% of the shares held by public equity shareholders.
In the case of InvITs, three fourth of unit holders, other than the InvITs sponsor, need to approve a change of control transaction. This could mean that the liability of a buyer could extend beyond the 26% offer they would need to make in the case of a listed company.
For instance, if only 67% of unit holders of an InvIT who are in the category of public, consent to a change of control, an acquirer would theoretically have to buy 33% of the unit holders who did not consent.
More InvITs are coming up and there “may be many opportunities” for change in sponsor, said Danny Samuel, chief executive officer of the publicly listed Roadstar Trust.
“In theory, the incoming buyer may end up buying a very large portion of public/non-sponsor units. Bharat InvITs Association has submitted a white paper to Sebi to make regulations simpler for incoming buyers and perhaps make it similar to requirements for equity holders with similar limits,” said Samuel.
M&A Enabler: Seek open offer-type mechanism, say 75% of unit holders, other than sponsor, now need to okay sale of an InvIT
“If the current norms are indeed cumbersome, then having a tried and tested approach from the takeover code being adopted makes sense,” said a former regulatory official.
While some believe open offer thresholds akin to those for listed companies will help M&A transactions in InvITs take off, others said minor changes in the way threshold limits for approval of changes in control are calculated are also in order.
“Any change in sponsor or change in control of sponsor in an InvIT, or an InvIT becoming self-sponsored, requires approval from 75% of all unitholders by value. In widely held InvITs with large institutional and retail participation, achieving this threshold can become practically difficult,” said Harsh Shah, managing director of publicly listed Indigrid, a KKR-backed InvIT.
“The representation has, therefore, suggested that the approval threshold may instead be linked to unitholders present and voting, similar to several other listed market processes,” he said.
There are currently 24 listed InvITs, spanning roads, power transmission, renewables, telecom and gas pipelines. Road InvITs alone account for about ₹3 lakh crore of the total AUM as of March 2026.
“In light of the peculiar governance structure, the current InvIT regulatory framework seeks to protect the minority unitholders by giving them a vote on the change in sponsor decision itself, in addition to an exit offer if the vote is defeated. A change in the manner in which such votes are counted will make the framework more beneficial for all parties,” said Nikhil Naredi, partner, Shardul Amarchand Mangaldas.
“Aligning dissenting unitholder exits in InvITs with a transparent open-offer framework can strengthen minority investor confidence and improve governance credibility,” said an investment banker on the condition of anonymity.
Source: Economic Times