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SEBI allows REITs and InvITs to issue commercial paper

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Securities and Exchange Board of India through its circular dated September 22, 2022, has allowed Infrastructure Investment Trusts and Real Estate Investments Trusts to issue commercial papers.

Commercial Paper are unsecured money market instruments issued in the form of a promissory note. According to the Reserve Bank of India (RBI)’s Commercial Paper Directions, 2017 the original tenor of a commercial paper shall be between 7 days to 1 year.

SEBI through its circular has allowed REITs and InvITs whose net worth is INR 100 crore or more, to issue listed commercial paper. REITs and InvITs are pooled investment vehicles which make investments in real estate and infrastructure sector, respectively. The circular, further, provides that issuance of commercial papers by REITs and InvITs shall be in accordance with Reserve Bank of India (RBI)’s guidelines for issuance of commercial papers. Furthermore, listing of these commercial papers shall be regulated by SEBI (Issue and Listing of Non – Convertible Securities) Regulations, 2021 and circulars issued thereunder.

The circular also clarifies that issuance of such listed commercial papers shall be within the overall debt limits permitted under REITs and InvITs Regulations.

The circular is an important measure to empower REITs and InvITs to ensure short term liquidity as most of their projects are capital intensive and ease in fundraising will allow them to timely complete their projects and their commitments made to the investors.

Readers can share their views on the issue with Regstreet Law Advisors at info@regstreetlaw.com

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