Framework for Issuance of Depository Receipts on Units of Infrastructure Investment Trusts (InvITs)

The Securities and Exchange Board of India (SEBI) has introduced a comprehensive framework permitting Infrastructure Investment Trusts (InvITs) to issue Depository Receipts (DRs) listed on international exchanges in permissible jurisdictions, specifically targeting International Financial Services Centres (IFSCs) in India such as India International Exchange (India INX) and NSE International Exchange (NSE IX). Issued under Regulation 14(5C) of the SEBI (InvIT) Regulations, 2014, read with the Depository Receipts Scheme, 2014, and FEMA NDI Rules, 2019, this framework enables InvITs to raise international capital via fresh unit issuances or transfers by existing unitholders. The framework mandates explicit unitholder approvals, pricing parity with domestic issues, merchant banker oversight, strict beneficial ownership checks, and voting rights exercisable solely via DR holder instructions.

Key Highlights :

● Permissible Jurisdictions & Exchanges: DRs on InvIT units are restricted to IFSCs in India (India International Exchange and NSE International Exchange).

● Approval Requirements: Fresh issue of DRs requires at least 75% unitholder approval, except for simultaneous initial domestic listings and DR offerings, or subsequent offerings within previously approved unitholder limits.

● Eligibility Restrictions: InvITs, their parties, directors, promoters, partners, and transferring unitholders must not be debarred by SEBI, designated as willful defaulters, or classified as fugitive economic offenders.

● Domestic Pricing Parity: DR issue/transfer pricing cannot be lower than the price applicable to corresponding domestic offerings (initial offer, preferential allotment, or institutional placement).

● Public Unitholding Impact: Units held by domestic depositories for DR issuance are classified as non-public unitholding for calculating minimum public unitholding compliance.

● Mandatory Merchant Banker & Reporting: Investment Managers must appoint a merchant banker to oversee compliances, file offer documents with SEBI and stock exchanges, and ensure disclosures made on international exchanges are submitted to Indian exchanges within 24 hours.

Background / Context :

● The Depository Receipts Scheme, 2014, and Foreign Exchange Management (Non-debt Instruments) Rules, 2019, permit persons resident outside India to invest in foreign currency-denominated instruments backed by permissible Indian securities, including InvIT units.

● Sub-regulation (5C) of Regulation 14 of the SEBI (Infrastructure Investment Trusts) Regulations, 2014, provided for DR issuance on InvIT units subject to operational frameworks specified by SEBI.

● This circular operationalizes the regulatory bridge between domestic InvIT structures and international capital markets operating within Indian IFSCs (GIFT City).

What Has Changed :

Provision Earlier Position New Position Effective From

Permissible Jurisdictions No operational framework existed for issuing foreign currency DRs on InvIT units. DRs can be issued and listed on specified international exchanges in IFSC India (India INX, NSE IX). November 02, 2026

Unitholder Approval Not specified for foreign listings. Requires 75% majority vote for fresh DR issues, subject to exceptions for simultaneous IPOs or pre-approved limits. November 02, 2026

Merchant Banker Role Standard domestic issue oversight. Mandatory appointment of merchant banker to oversee DR compliances and submit compliance reports to the Board of Directors of the Investment Manager. November 02, 2026

Voting Rights Unclear mechanism for cross-border units. Voting rights on underlying units can only be exercised by the Foreign Depository pursuant to explicit instructions from the DR holder. November 02, 2026

Disclosure Alignment Domestic disclosures only. All public disclosures made on International Exchanges must be mirrored on Indian Recognized Stock Exchanges within 24 hours. November 02, 2026

Minimum Public Unitholding General rules applied. Units deposited for DR issuance are explicitly treated as non-public unitholding for calculation purposes. November 02, 2026

Who Is Affected :

● Infrastructure Investment Trusts (InvITs) seeking cross-border capital raising or global liquidity.

● Investment Managers of InvITs responsible for execution, governance, merchant banker oversight, and regulatory filings.

● Domestic Custodians and Indian Depositories managing unit holdings and cross-border fungibility tracking.

● Foreign Investors / Foreign Depositories issuing foreign currency-denominated receipts backed by InvIT units.

● Existing Unitholders of InvITs who are provided an opportunity to tender units in DR listings via transfer transactions.

Compliance Action Points & Deadlines :

1. Appoint Merchant Banker: Investment Managers must formally appoint a registered merchant banker to oversee all DR issuance compliances and present a compliance report to the Manager's Board of Directors (Prior to DR filing).

2. Document Filings: File draft initial offer documents through the merchant banker with SEBI (7 working days review window) and Recognized Stock Exchanges (15 working days in-principle approval window) (Prior to issue launch).

3. Obtain Unitholder Resolution: Pass a special resolution requiring at least 75% favorable votes for fresh DR issuances, unless covered under simultaneous initial listing or existing limits (Prior to issue launch).

4. Equal Opportunity Mechanism: In DR listings involving transfer of units by existing unitholders, provide all existing unitholders an opportunity to tender their units (During transfer process execution).

5. Continuous Mirror Disclosures: Submit all public disclosures filed on International Exchanges to domestic Recognized Stock Exchanges within 24 hours (Within 24 hours of international disclosure).

6. Fungibility & Reconciliation Reporting: Domestic Custodians and Indian Depositories must coordinate daily/regularly to report outstanding DR unit counts and conversion limits as per SEBI Master Circular guidelines (Ongoing).

Analysis & Impact :

● For CA / CS / Tax & Legal Professionals: Ensures strict governance requirements when drafting InvIT offer documents. Legal counsels must audit the eligibility of all InvIT parties (promoters, directors, major unitholders) against SEBI debarment, willful defaulter, and fugitive economic offender lists before initiating filings.

● For Businesses & Investors: Opens a direct channel for InvITs to tap offshore capital and foreign institutional investors via GIFT City IFSC exchanges. However, issuers must account for the reduction in public float calculations since DR-linked units are treated as non-public holdings.

● For News Readers: Indian infrastructure trusts can now trade on global-facing stock exchanges in India, giving foreign investors easier access to Indian real-asset yields.

● Points to Watch: Issuance of operational guidance notes by domestic depositories (NSDL/CDSL) and IFSC exchanges regarding two-way fungibility and conversion limit mechanisms.

Related Laws, Rules & References :

● SEBI (Infrastructure Investment Trusts) Regulations, 2014 – Regulations 14(2), 14(4), 14(5C), 22(5C), and 33.

● Depository Receipts Scheme, 2014 – Notification F.No. 9/1/2013-ECB dated October 21, 2014.

● Foreign Exchange Management (Non-debt Instruments) Rules, 2019 – Notification S.O. 3732(E) dated October 17, 2019.

● SEBI Master Circular for Stock Exchanges and Clearing Corporations – Dated December 30, 2024 (Annexure 6, Chapter 1).

● Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 – Rule 9(1) proviso.