SEBI Eases Debt Rules for Road InvITs, Boosting Infrastructure Funding

The Securities and Exchange Board of India (SEBI) is considering a regulatory amendment to permit road-focused Infrastructure Investment Trusts (InvITs) to include major maintenance expenses in their Net Distributable Cash Flow (NDCF) calculations, provided these expenses are financed through debt. This proposed change aims to alleviate financial pressure on InvITs by allowing them to borrow for substantial upkeep without negatively impacting their reported distributable cash. Currently, major maintenance expenditures are deducted from the operating cash flow, which can reduce the NDCF and, consequently, the distributions to unit holders. By allowing debt-financed major maintenance to be re-added, SEBI seeks to enhance the attractiveness and financial flexibility of road InvITs. This adjustment could encourage greater investment in India's critical road infrastructure, a sector vital for economic growth and logistics efficiency. The move aligns with broader government efforts to catalyze private investment in infrastructure development. Relaxing these norms is expected to improve the long-term viability of road assets held by InvITs, making them more appealing to institutional investors seeking stable, yield-generating assets. Increased debt capacity for maintenance could also lead to better-maintained road networks, reducing future operational disruptions and supporting higher traffic volumes.