SEBI Amends Master Circulars for REITs and InvITs to Enhance Financial Disclosures and Compliance Framework

The Securities and Exchange Board of India (SEBI) vide two separate circulars dated May 7, 2025 (Circulars), amended the master circulars for real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) dated May 15, 2024 (Master Circulars). The Circulars have revised Chapters 3 and 4 of the Master Circulars to enhance the disclosure requirements for financial information in offer documents/placement memorandum and aim to strengthen the framework for continuous disclosures and compliance obligations applicable to REITs and InvITs. Further, paragraph 7 of Annexures 5 and 6 of the Master Circulars have also been amended.

The following key changes have been introduced by SEBI:

• Disclosure of Financial Information in Offer Documents/Placement Memorandum
• Period of Financial Statements: REITs and InvITs in initial offers and follow-on offers must disclose audited financial statements for the last three completed financial years and if applicable, for a stub period. If the financial statements for the last completed financial year are older than six months from the date of filing the offer document, audited financials for a stub period, ending no earlier than six months before the filing date must also be provided. In follow-on offers, where a REIT or InvIT has not completed three financial years, audit financial statements for such years in which the investment trust has been in existence, should be disclosed, along with the stub period, if applicable.
• Nature of Financial Statements: in both initial and follow-on offers, audited combined financial statements of the REIT or InvIT must be disclosed in the offer documents. For follow-on offers, separate audited financial statements of the investment trust must also be made available on its website, with a link provided in the offer document. Additionally, in cases of follow-on offers, if an investment trust has acquired or divested any material asset after the latest disclosed financial period but before filing the offer document, pro-forma financial statements must be disclosed. Such pro-forma financial statements should cover the last completed financial year and stub period, if any. The Circulars have also set out the principles governing the preparation of such pro-forma financial statements.
• Pro-forma Financial Statements: any acquisition or divestment of business or special purpose vehicle (SPV) or holding company (HoldCo) by an investment trust would be material only if, in aggregate, it contributes 20% or more to turnover, net worth or profit before tax as per the latest annual consolidated financial statements. These pro-forma statements, prepared as per guidelines issued by the Institute of Chartered Accountants of India (ICAI), must be certified by the statutory auditor of the investment trust or chartered accountant holding a valid certificate issued by the Peer Review Board of the ICAI. If the materiality threshold is not met, only the details of the transaction such as the fact and consideration of the acquisition or divestment need to be disclosed in the offer document. Additionally, if the transaction either does not breach the materiality threshold or has been undertaken prior to the latest disclosed financial period, the investment trust may voluntarily provide pro-forma financial statements. The investment trust may also voluntarily provide auditor or chartered accountant certified financials for businesses acquired or divested. Further, if issue proceeds are to be used to acquire one or more businesses, the trust may choose to voluntarily disclose certified proforma financial statements showing the impact of such acquisitions.
• Content of Financial Information: Financial statements for REITs and InvITs are now required to be prepared in accordance with Division II of Schedule III of the Companies Act, 2013 subject to specified exceptions and modifications. The revised requirements also mandate statements of net assets and total returns at fair value to be included as specific line items in the audited financial statements. For follow-on offers, these fair value statements shall be provided for the entire period covered by the financial information disclosed in the offer document, whereas for initial offers, such statements are only required for the last date of the disclosed financial period or for the last completed year and any applicable stub period, as the case may be.
• Other Disclosures: other disclosures required in the offer document include brief profiles of the key personnel of the manager and units held by them in the investment trust, basis for determination of issue price, and, if the objects of the issue are not financed solely through the issue proceeds, details of additional financing arrangements used to fulfil the stated objects.
• Rules Relating to Distribution: surplus cash available not only in SPVs but also at the REITs/InvITs and HoldCo levels, may now be considered for distribution to the trust/HoldCo or by the trust to its unitholders, as the case may be, provided, such distribution is separately disclosed following the computation of net distributable cash flows (NDCF) for the respective period. Moreover, any additional surplus available with SPV must first be used to repay any external debt if the acquisition of SPV was funded by an external debt. Thereafter, the remaining surplus, if any, may be distributed upstream. Additionally, debt repayments at the trust/HoldCo/SPV level will not be reduced from NDCF if the repayment is funded through refinancing, where refinancing is at HoldCo/SPV level to repay debts of the trust (with proceeds from refinancing transferred upstream) or where refinancing is at trust level to repay debts of the HoldCo/SPV (with proceedings from refinancing transferred downstream). Managers of the trust are now required to adhere to clearly defined guidelines while making distributions including maintaining consistency in distribution frequency, aggregating cash flows from all assets for distribution, and obtaining approval of unitholders for any changes to the distribution policy.

• Continuous Disclosures and Compliances by REITs and InvITs
  REITs and InvITs must now submit quarterly and year-to-date financial results with the stock exchanges within 45 days of each quarter’s end (except for the last quarter), and annual financial results within 60 days of the financial year-end. The last quarter’s results must be the balanced figures between the full-year audited figures and the figures reported up to the third quarter. Further, the statement of NDCF must be submitted to stock exchanges as part of the financial results if the trust declares and distributes NDCF to its unitholders and must be disclosed in the annual report and half yearly report.

Additional audited disclosures are now mandated, including project-wise operating cash flows, contingent liabilities, and commitments as of the latest financials date. These financials must be audited by peer-reviewed auditors approved under the REIT and InvIT regulations.

The Circulars are applicable with immediate effect, except for the provisions under Chapter 4 of the Master Circulars, which will apply to financial disclosures for the period commencing on or after April 1, 2025.

Conclusion

The aforesaid framework strengthens financial and continuous disclosure requirements and aims to align Indian disclosure standards with global best practices.