The Securities and Exchange Board of India (SEBI) on June 01, 2026, issued the notification regarding the Consultation Paper on Review of Framework for Calculation of Net Distributable Cash Flows for InvITs.
The following has been stated namely: -
• SEBI proposes allowing InvITs to add back major maintenance (MM) expenses funded through external borrowings while calculating Net Distributable Cash Flows (NDCF).
• The proposal applies only to road projects under the "Roads and Bridges" infrastructure sub-sector.
• Major maintenance expenses refer to non-routine road maintenance expenditures required under concession agreements.
• Payments for MM expenses funded by external debt can be added back to NDCF at both the SPV/HoldCo level and the Trust level.
• Unitholder approval (minimum 60% of votes cast in favor) is mandatory before debt-funded MM expenses can be added back to NDCF.
• The explanatory statement to unitholders must disclose:
o Projects/SPVs/HoldCos involved,
o Categories of MM expenses,
o Project-wise and year-wise expense estimates,
o Impact on future growth, leverage, and distributions,
o Alternative funding options if debt is unavailable.
• SEBI warns that MM debt reduces future borrowing capacity, as such debt forms part of the InvIT's aggregate leverage, though it may increase short-term distributable cash flows.
• Statutory auditors must certify that:
o MM expenses comply with concession agreement requirements, and
o Such expenses were actually funded through external borrowing.
• Enhanced disclosures will be required in annual, half-yearly, and quarterly reports, including:
o MM debt outstanding,
o New MM borrowings raised,
o Debt maturity profile of MM borrowings,
o MM debt as a percentage of total borrowings.
• SEBI has invited public comments until June 22, 2026 through the online web-based form, specifically on:
o Whether debt-funded MM expenses should be added back to NDCF, and
o Whether the proposed safeguards and disclosure requirements are adequate.
