The Securities and Exchange Board of India (SEBI) on February 02, 2024, issued a Consultation paper on flexibility to Category I and II AIFs to create an encumbrance on their holding of equity in infrastructure sector investee companies to facilitate the raising of debt by such investee companies.
The objective of this consultation paper is to seek comments and inputs from stakeholders and the public on a proposal for amendment to SEBI (Alternative Investment Funds) Regulations, 2012.
The following has been proposed:
• Category I and II AIFs may create encumbrance on the equity of an investee company only for borrowing by the said investee company, if the investee company is in the business of development, operation or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure issued by the Department of Economic Affairs, Ministry of Finance, Government of India, from time to time.
• Schemes of Category I and II AIFs who have not on-boarded investors as of the date of aforesaid mandate, shall disclose explicitly in their PPMs if encumbrance on equity of investee companies, as described above, is envisaged as part of their investment strategy.
• The duration of encumbrance on equity shall not be greater than the residual tenure of the scheme of the AIF.
• AIFs shall not create an encumbrance on the equity of foreign investee company.
Public comments are invited for the proposal given above. Any of the following modes may provide the comments/suggestions by February 23, 2024:
Preferably through an Online web-based form through the following link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComments=yes
It may be noted that the online web-based form will accept comments till February 23, 2024.
