December 8, 2023: The Securities and Exchange Board of India (Sebi) on December 6, 2023, released the standard framework for calculation of available net distributable cash flows (NDCFs) by real estate investment trusts (REITs), infrastructure investment trust (InvITs) and their respective holding companies (HoldCo). The new framework will be effective from April 1, 2024, the Sebi said in two separate circulars.
Under the new rules, the NDCF is computed at the level of REITs, InvITs and their holding companies or special purpose vehicles (SPVs). Further, the minimum distribution should be 90% of the NDFC at the trust level as well as the HoldCo/SPV level. This is subject to applicable provisions in the Companies Act or the Limited Liability Partnership Act. Sebi said that the option to retain 10% distribution needs to be computed by taking together the retention done at SPV level and Trust level.
Sebi also laid down an illustration of NDCF calculation that shows how NDCF should be calculated at the trust and the SPV level, listing cash flows from operating activities, proceeds from asset sales, debt repayments and creation of necessary reserves.
“Further, Trust along with its SPVs needs to ensure that minimum 90% distribution of NDCF be met for a given financial year on a cumulative periodic basis,” the regulator said, as cited by a PTI report. Similarly, any restricted cash should not be considered for NDCF computation by the SPV or InvIT. Last month, Sebi came out with detailed procedures for dealing with unclaimed funds of investors lying with entities having listed non-convertible securities, REITs and InvITs.
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