Updated SEBI Guidelines on InvIT and REIT Disclosures

Introduction

On May 7, 2025, the Securities and Exchange Board of India (“SEBI”) released a circular^[1] that changes the reporting and compliance rules for Infrastructure Investment Trusts (“InvITs”) and Real Estate Investment Trusts (“REITs”). These changes apply to how financial information must be shared both before and after the listing of trust units on stock exchanges. The revisions are based on suggestions from a working group and industry representatives. SEBI has updated Chapters 3 and 4 of its earlier circular dated May 15, 2024. The aim of these changes is to bring clarity to financial disclosures and to guide how InvITs and REITs manage and share information with investors and the public. Most of the provisions took effect immediately, while some applied from April 1, 2025.

Explanation

The changes in Chapter 3 focus on the kind of financial information InvITs must provide in their offer documents. InvITs are now required to disclose audited financial statements for the past three years and for a stub period if the latest annual report is more than six months old. If the InvIT has existed for less than three years, it must disclose financials for the time it has been operational. For initial offers, combined financial statements are required. For follow-on offers, consolidated statements must be used. These must follow Indian Accounting Standards.

If the InvIT has recently acquired or sold assets, and the transaction is considered material, it must prepare proforma financial statements. These statements must show the financial effect of the transaction for at least one full year and any stub period. These proforma statements must be prepared and certified based on guidance from the Institute of Chartered Accountants of India (“ICAI”). InvITs can also choose to disclose such financials voluntarily, even if the transaction does not meet the materiality threshold.

In addition to financial statements, other information must also be provided. This includes project-level cash flows, details of transactions with related parties, a capitalisation statement, and a record of debt repayments. The offer document must also show the net asset value and total returns, both based on fair value. Capital expenditure must be adjusted in the cash flow calculations if it was not funded by debt or earlier reserves.

InvITs must also disclose projections for revenue and cash flow. These projections must cover the current year and the next three financial years. The information must be broken down project-wise and certified by both the auditor and the investment manager. The projections must include actual results for the part of the current year that has already passed.

A section of the offer document must explain the financial statements in plain language. This Management Discussion and Analysis section must show comparisons with past years, explain changes in income and expenses, and describe factors that might affect results. It must also disclose how related party transactions are handled and whether any major changes or risks have occurred since the last reported period. Offer documents must also include short financial statements of the investment manager and sponsor(s) for the last three years. These statements must follow Indian accounting standards or international ones if the entity is foreign. If the accounting standards changed during that period, the disclosures must reflect the relevant standards for each year.

SEBI has also introduced a method for calculating Net Distributable Cash Flow (“NDCF”). The cash flow must be shown at both the trust level and at the level of any holding companies or special purpose vehicles (“SPVs”). The calculation must consider cash from operations, income from investments, asset sales, financing costs, and any required reserves. SEBI has clarified that distributions cannot be funded by external debt unless certain conditions are met. Trusts can retain part of the distributable amount but must stay within a 10% limit across all levels. Any cash surplus carried forward or held for reinvestment must be accounted for separately.

Chapter 4 of the circular deals with ongoing disclosures after an InvIT is listed. Financial results must be shared with stock exchanges quarterly and annually, within set deadlines. These must include profit and loss statements, asset and liability statements, cash flows, changes in equity, NDCF calculations, and segment information. Financials must be shared on both a standalone and consolidated basis. If there has been a distribution that reduces capital, this must be clearly shown in the balance sheet. All financial reports must include prior period comparisons unless the entity did not exist during those periods. Statements must be prepared using the accrual method and must comply with accounting standards for interim and full-year reporting. InvITs may also choose to report under international standards but must explain any differences.

Other disclosures include fees paid to managers, including how the fees are calculated and any changes compared to earlier periods. If the InvIT holds assets in multiple infrastructure sectors, a breakdown of investments by sector must be provided. Any changes in accounting policies must be disclosed, and profits or losses from sale of assets must be reported without adjustments.

Conclusion

SEBI’s circular introduces a set of procedures for InvITs and REITs to follow when disclosing financial information. It covers both the period before listing and the ongoing compliance obligations after listing. These changes are meant to bring consistency in reporting, allow for better tracking of transactions, and help unitholders understand how the trust is performing.