Regulatory Updates #14: SEBI on public issue of InvITs & RBI issues norms for Branch Offices of Foreign Entities

Bar & Bench will bring to you the latest regulatory and policy updates from different ministries and regulatory authorities. In this edition of Bar & Bench Regulatory Updates, we analyse the guidelines issued by the Reserve Bank of India for establishment of Branch Offices of Foreign Entities and rules pertaining to public issue of units of Infrastructure Investment Trusts..Procedure for setting up Branch Office of a foreign entity.In furtherance of the regulations issued on 31 March 2016 with respect to establishment of Branch Office (BO)/ Project Office (PO)/ Liaison Office (LO), the Reserve Bank of India has now laid down the framework and procedure involved..The entities having businesses which fall under 100 per cent Foreign Direct Investment route are allowed to set up such offices with the approval of designated banks..However, following applicants must make an application to the RBI for establishment:.Citizen of or entity registered/incorporated in Pakistan;Citizen of or entity registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau wanting to open a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands;Whose principal business falls in any of the following sectors viz. : Defence, Telecom, Private Security and Information and Broadcasting.Non Government Organisation, Not for Profit Organisation, or any body of a foreign government..An applicant that is not financially sound (as per Regulation 4 of the principal regulations) is required to submit a Letter Of Comfort issued by its parent company provided that such parent company qualifies the prescribed criteria for net worth and profit..The office for which approval is granted must be opened within six months failing which the approval shall stand lapsed..While the validity of an LO is in general for three years, approval for Non-Banking Financial Companies and those engaged in construction and development will be valid only for two years..SEBI allows listing of InvIT Units.The Securities Exchange Board of India (SEBI), last week, released guidelines for public issue of units of Infrastructure Investment Trusts (InvITs) making it easier for developers to raise capital from the public..Among other companies, earlier this year, IRB infrastructure and GMR Infrastructure had sought SEBI’s approval for listing units of its InvITs in hope of high foreign investment to unlock frozen capital..As per the guidelines, while a maximum of 75 per cent of the issue size may be allocated to institutional investors, the remainder is open to ‘other investors’..Out of the 75 per cent available for institutional investors, 60 per cent may be allocated to anchor investors by the investment manager. However, the anchor investors will inter alia be required to make an application of at least Rs. 10 crore in the public issue. Allocation to anchor investors will be done on a discretionary basis subject to a minimum of two investors for allocation up to Rs. 250 crore and a minimum of five investors for above Rs. 250 crore..The investment manager may discover the price of the InvIT units either through book building or in consultation with the lead merchant banker. Differential pricing will not be offered to any investor..The Investment manager must, prior to opening of subscription, make a deposit worth 0.5 per cent of the amount of units offered to the public or of Rs. 5 crore, whichever is lower..The issue will be kept open for at least three working days but not more than thirty days. However, in case the price band in a public issue made through the book building process is revised, the bidding issue period will be extended for a minimum period of one working day.