InvITs: SEBI allows add-back of debt-funded major maintenance expense of road projects in Net Distributable Cash Flows, with unitholder approval
SEBI has changed the framework for computing Net Distributable Cash Flows of InvITs. Payments towards major maintenance expense of road projects, to the extent funded by external borrowing, can be added back at the HoldCo/SPV level and at the Trust level. The add-back needs unitholder approval with at least 60% of votes cast, a statutory auditor’s certificate and specified disclosures.
Key facts
- Published
- 14 August 2026
- Section
- SEBI
- What it is
- Rule change
- In force
- Immediate effect from 14 August 2026
- Who it affects
- Infrastructure Investment Trusts holding road projects, their investment managers, SPVs and HoldCos, statutory auditors, InvIT unitholders
In 30 seconds
- Circular No. HO/17/11/17(5)2026-DDHS-POD2/I/18791/2026 is dated 14 August 2026 and is in force with immediate effect.
- It amends Para 3.19 of Chapter 3 of the Master Circular for InvITs dated 11 July 2025.
- A new add-back line is inserted in the NDCF computation at both HoldCo/SPV level and Trust level.
- Unitholder approval under regulation 22(5) of the InvIT Regulations is needed for each project before the add-back.
- The statutory auditor must certify that the expenses match the concession agreement and were funded by external borrowings.
- Borrowing for major maintenance must be shown separately in the Net Borrowing Ratio, the NDCF notes and the debt maturity profile.
हिंदी में सार
SEBI ने 14 अगस्त 2026 के सर्कुलर से InvIT के Net Distributable Cash Flows (NDCF) की गणना बदली है: सड़क परियोजनाओं के major maintenance ख़र्च का वह हिस्सा, जो बाहरी क़र्ज़ से चुकाया गया हो, NDCF में वापस जोड़ा जा सकेगा। इसके लिए हर प्रोजेक्ट पर यूनिटधारकों की मंज़ूरी (डाले गए वोटों का कम से कम 60%), statutory auditor का प्रमाणपत्र और तय खुलासे ज़रूरी हैं। सर्कुलर तुरंत प्रभाव से लागू है।
What has changed
The framework for calculating Net Distributable Cash Flows (NDCF) of Infrastructure Investment Trusts is in Section F (Para 3.19) of Chapter 3 of SEBI’s Master Circular for InvITs dated 11 July 2025. An industry association asked SEBI to allow debt-funded major maintenance expenses to be added back in that calculation. After recommendations of the Hybrid Securities Advisory Committee and public consultation, SEBI amended the framework by a circular dated 14 August 2026.
A new line is added to both computation tables — at HoldCo/SPV level and at Trust level:
“(+) Payments made towards major maintenance expense for road projects to the extent funded by external borrowing subject to Note 12 below”
Changes to the notes
- Note 4: surplus cash arising from a debt raise stays excluded, but surplus cash available on account of payments for major maintenance of road projects funded by external debt may be distributed, subject to Note 12 and adequate disclosures.
- Note 6: no Trust or SPV can distribute cash flows by obtaining external debt, except to the extent clarified in notes 2, 7 and 12.
- Note 12 (new): the conditions for the add-back.
Conditions in Note 12
| Point | Requirement |
|---|---|
| Road project | A project in the “Roads and bridges” infrastructure sub-sector in the Ministry of Finance notification dated 19 September 2025, with later amendments or additions |
| Major maintenance expense | Expenditure on maintenance of a road project that is not routine maintenance and is in accordance with the concession agreement |
| Unitholder approval | Under regulation 22(5): votes cast in favour at least 60% of total votes cast. Taken for each project, before the add-back |
| How often | One-time for debt availed or to be availed over the project life cycle, or for a specific major maintenance expense. A deviation needing additional debt requires fresh approval before the debt is availed |
| Auditor | Certificate of the statutory auditor; the auditor may rely on an independent expert on whether the expenses match the concession agreement |
What the notice to unitholders must disclose
- The projects, SPVs or HoldCos for which the debt is proposed or already raised; it may be raised at Trust level or at SPV/HoldCo level.
- The categories of expenses treated as major maintenance.
- Indicative year-wise and project-wise estimates, as per the latest valuation report.
- The possible impact on future growth. SEBI’s suggested disclaimer says such debt forms part of the aggregate borrowing of the InvIT and reduces the leverage headroom available in future years, while giving higher cash flow for distribution since no cash is set aside for major maintenance.
- The present and future impact on distributions: possibly higher in the years leading up to the major maintenance, and subdued while the loan is repaid.
- Funding alternatives if debt is not available later, including that operating cash flows may have to be used.
Ongoing disclosures
In financial results and in annual, half-yearly and quarterly reports, the Net Borrowing Ratio must separate the amount and percentage of borrowing taken for major maintenance. The NDCF notes must give, for each project, SPV, HoldCo and the InvIT, the borrowing raised in the period and the outstanding debt for major maintenance. Debt maturity profiles must highlight this borrowing.
What investment managers should do
An InvIT that wants to use the add-back should first take the 60% unitholder approval project by project, with the full explanatory statement, and arrange the auditor’s certificate.
Questions and answers
What can an InvIT now add back while computing NDCF?
Payments made towards major maintenance expense for road projects, to the extent funded by external borrowing, subject to the conditions in the new Note 12. The line is added at both the HoldCo/SPV level and the Trust level.
Is unitholder approval needed?
Yes. Approval under regulation 22(5) of the InvIT Regulations — votes cast in favour being at least 60% of total votes cast — must be taken before the add-back, for each project for which the investment manager proposes to raise borrowing for major maintenance.
Does approval have to be taken every time?
It may be taken on a one-time basis for the debt already availed or proposed to be availed over the entire project life cycle, or for a specific major maintenance expense. Any deviation requiring additional debt needs unitholder approval before the debt is availed.
What does the statutory auditor certify?
That the major maintenance expenses incurred are in line with the obligations and requirements under the concession agreements, and that the payments were funded by external borrowings. The auditor may rely on an independent expert for the first part.
Does the change apply to projects other than roads?
The add-back is worded for road projects, defined as projects in the “Roads and bridges” infrastructure sub-sector in the Ministry of Finance notification dated 19 September 2025, including amendments or additions to it.
Published 14 August 2026. Updated 4 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.