Sebi on Monday overhauled the pricing norms for preferential allotment units in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).

Under the new framework, preferential allotment units are priced at the volume-weighted average price (VWAP) of the weekly high and low of 90 trading days or ten trading days, whichever is higher.

The pricing formula for preferential allotment is the VWAP of the past two weeks or the past 26 weeks, whichever is higher.

According to two separate notices, the price of the preferential issue of no more than five units to “institutional investors” must be no less than the VWAP of the relevant units quoted on the stock exchange ten trading days before the relevant date.

The regulator said there would be no priority offering of units to anyone who sells or transfers any units of the issuer within the 90 trading days before the relevant date. Currently, the term is six months.

If any sponsor sells or transfers its shares to the issuer 90 days before the relevant date, all sponsors will not be eligible for the preferential allotment.

However, this restriction does not apply to the sponsor if the REIT or InvIT acquires any assets from the sponsor and issues units to the sponsor in preference to the entire consideration for acquiring the assets.

In addition, the regulator defines frequently traded units as units of REITs or InvITs. These units have traded on the stock exchange for at least 10% of the total number of issued and outstanding units in the 240 trading days preceding the relevant date.

After the allotment, the relevant REIT or inviting investment trust must apply for listing, and the listing will be carried out within two working days after the allotment date. Currently, the period is seven days.

If the relevant REITs or InvITs are not listed within the stipulated time, the monies received will be refunded in a verifiable manner within four working days from the date of allocation.

In addition, if the amount is not repaid within the stipulated time, the REIT or InvIT, the managers of such units and their directors or partners will be jointly liable for repayment of the amount at the rate of 15% per annum from the due date. Fourth working day.

In November 2019, the regulator issued guidance on preferential issues for REITs, InvITs and institutional placement units.

REITs and InvITs are relatively new investment vehicles in India but are very popular in the global market. REITs contain a portfolio of commercial real estate assets, most of which are leased, while InvITs contain infrastructure assets, such as highways and transmission assets.