SEBI has issued a circular, effective May 15, 2026, clarifying the permissible use of fresh borrowings for Infrastructure Investment Trusts (InvITs) whose net borrowings exceed forty-nine percent of the value of their assets. This follows the amendment to Regulation 20(3)(b)(ii) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014, notified on April 17, 2026.
InvITs are typically subject to a borrowing ceiling, but the regulations have always recognised that certain high-capital situations may require flexibility beyond this threshold. Until now, the specifics of what qualifies as a permissible use above 49% were not explicitly enumerated. This circular removes that ambiguity.
Three permitted uses above the 49% threshold
The first is capital expenditure made to enhance asset performance or for capacity augmentation. This is particularly significant for infrastructure assets where periodic enhancement is integral to long-term viability and revenue generation.
The second is major maintenance expense in respect of road projects. Major maintenance here means expenditure on road upkeep that is not routine in nature and is specifically mandated under the concession agreement. A road project, for this purpose, refers to a project in the 'Roads and bridges' infrastructure sub-sector as defined under the Ministry of Finance notification dated September 19, 2025, including any subsequent amendments.
The third is refinancing of existing debt, applicable to the InvIT, its SPV, or Holdco — subject to two strict conditions. First, the original debt being refinanced must itself have been used for a purpose already permitted under Regulation 20(3)(b)(ii). Second, only the principal portion of the debt may be refinanced — accumulated interest, charges, or fees of any kind are explicitly excluded.
Why this circular matters
Infrastructure assets are capital-intensive by nature. Road concessions, power transmission lines, and other InvIT-held projects routinely require significant periodic expenditure well beyond day-to-day operations. The 49% borrowing cap, while a prudent guardrail, can create friction for InvITs managing large, long-lived assets with lumpy capital requirements.
By codifying these three categories, SEBI has given trustees, investment managers, and lenders a clear framework to structure financing above the threshold — without the uncertainty of case-by-case interpretation. The refinancing carve-out in particular is a practical acknowledgement that debt management is an ongoing function, not a one-time event.
Key takeaway for practitioners
For InvIT trustees and investment managers, this circular is both a compliance guide and a structuring tool. Borrowings above 49% must now be mapped to one of the three permitted categories. For road InvITs in particular, the major maintenance and refinancing provisions offer meaningful headroom — provided the original debt lineage and concession obligations are well documented.
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