SEBI to relax InvIT cash flow distribution rules

The Securities and Exchange Board of India (SEBI) has proposed to relax its framework for calculating net distributable cash flows (NDCF) for infrastructure investment trusts (InvITs), specifically for road sector projects, by allowing certain debt-funded major maintenance expenses to be added back while computing distributable cash flows. Currently, InvITs and their special purpose vehicles (SPVs) are prohibited from using external debt for distributions. As major maintenance expenses are treated as operating costs under accounting standards, they reduce operating cash flows and lower NDCF even when funded through debt. Hence, the regulator proposed allowing payments made towards major maintenance of road projects to be added back to NDCF to the extent they are financed through external borrowings. The relaxation would apply only to projects classified under the roads and bridges infrastructure subsector.