JSA
This edition of the JSA Brief showcases JSA authored articles, updates & newsletters and achievements such as deals and events in all practice area over the preceding month (May 2026).
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The Securities and Exchange Board of India (“SEBI”) has issued a consultation paper on June 1, 2026, proposing changes to the framework governing the calculation of Net Distributable Cash Flows (“NDCF”) for Infrastructure Investment Trusts (“InvITs”) in India. The proposal seeks to address the treatment of debt availed for major maintenance expenses in road-sector projects and, if implemented, would no longer penalise Road InvITs for incurring major maintenance, so long as such major maintenance is funded through debt. The proposal follows representations received from the Bharat InvITs Association.
SEBI’s standardised NDCF framework, introduced in December 2023 and subsequently incorporated into the InvIT Master Circular, established a uniform methodology for calculating distributable cash flows at both the InvIT and Special Purpose Vehicle (“SPV”) or Holding Company (“HoldCo”) levels and is to be mandatorily adhered to by all InvITs. A central feature of the framework is the prohibition on using borrowed money for distribution to unitholders. However, the starting point to calculate the NDCF is “Cash flow from operating activities” which is computed after deducting all operating expenses including major maintenance expenses. As per the accounting standards, major maintenance expenses are treated as operating expenses and not capitalised, notwithstanding the significant quantum of such expenditure. Such expenses are mandatorily required to be incurred in accordance with the terms of a typical concession agreement in India. Further, these expenses are typically funded through debt though some InvITs have used a part of their equity fund raised to incur the expenditure.
As these expenses cannot be capitalised under the current NDCF framework, any major maintenance expense incurred by availing debt is mandatorily reduced from the operational cash flow, thereby resulting in reduction in NDCF. Furthermore, any change in approach would significantly increase the weighted average cost of capital SPV acquisitions and may discourage monetisation of projects through InvITs.
SEBI has proposed permitting payments made towards major maintenance expenses for road projects to be added back for NDCF computation, to the extent such expenses are funded through external debt.
The proposal is restricted to projects falling within the ‘Roads and Bridges’ infrastructure sub-sector under InvITs in India. Further, major maintenance expenditure are proposed to be defined as expenditure incurred on maintenance of road projects that is non-routine in nature and undertaken in accordance with obligations prescribed under the relevant concession agreement.
To operationalise the proposal, SEBI has proposed inserting a new line item in the NDCF computation framework at both the HoldCo/SPV level and InvIT level. The new adjustment would allow addition of payments made towards major maintenance expenses for road projects to the extent such expenses are funded by external borrowing subject to the unitholder’s approval.
Correspondingly, SEBI has proposed to amend the framework to incorporate the exception.
The proposed framework requires prior approval from the unitholder of the InvIT before debt-funded major maintenance expenditure can be added back for NDCF purposes. Approval must be obtained project-wise and may be sought either for the entire project lifecycle or for specific major maintenance expenditure. Any future deviation requiring additional borrowing beyond the approved amount would require fresh approval.
The unitholder approval would be subject to the voting threshold prescribed under Regulation 22(5) of the SEBI (InvIT) Regulations, 2014, requiring at least 60.00% of votes cast to be in favour of the resolution.
A certificate of statutory auditor will also be required certifying that the payments actually made for major maintenance expense is in line with the obligations and the requirements for major maintenance stated under the concession agreements and is funded by external borrowing. However, the paper doesn’t clarify if this is the statutory auditor of the InvIT or of the HoldCo/SPV.
SEBI has also proposed extensive disclosure requirements in connection with major maintenance borrowing to be added back to distributions, including:
The proposal also requires continuing disclosures relating to debt maturity profiles, net borrowing ratios and project-level major maintenance borrowings.
Recognition of sector-specific cash flow characteristics
The consultation paper acknowledges the distinctive cash flow profile of road assets. While major maintenance expenditure is treated as an operating expense for accounting purposes, the consultation paper recognises that such expenditure is often substantial, periodic in nature and necessary for preserving the operational viability of concession assets. The proposal also recognised that funding of major maintenance through capital would significantly increase the weighted average cost of capital for SPV acquisitions and thereby discourage the developers from monetising their projects through InvITs.
The proposal, therefore, seeks to address the disconnect between accounting treatment and the economic realities of long-term infrastructure assets with a focus on road InvITs.
Potential impact on distribution profiles
A notable consequence of the proposal is its potential effect on distributable cash flows. The consultation paper itself recognises that where no major maintenance reserves are accumulated, and maintenance expenditure is financed through debt, unitholders may receive higher distributions during the years preceding the major maintenance cycle.
At the same time, the paper highlights that subsequent debt servicing obligations may affect future distributions depending on the repayment schedule agreed with lenders.
Accordingly, the proposal does not eliminate the economic cost of major maintenance. Rather, it changes the timing and presentation of its impact within the NDCF framework.
Greater transparency around leverage utilisation
An important feature of the proposal is the emphasis on transparency. Instead of creating a broad exemption from existing borrowing restrictions, SEBI has proposed multiple safeguards, including project-level approvals, statutory auditor certification, enhanced leverage disclosures and explicit communication of the implications for future growth and distributions.
For institutional investors and analysts, these disclosures may provide greater visibility into the extent to which distributions are supported by debt-funded maintenance strategies and the resulting implications for leverage capacity.
Implications for sponsors and asset monetisation
The consultation paper records industry representations that changes in the treatment of major maintenance expenditure could affect acquisition economics and weighted average cost of capital assumptions for the road-sector InvIT transactions. Industry participants have also indicated that the current framework may discourage monetisation of road assets through InvIT structures.
The proposal may therefore be viewed as an attempt to align the NDCF framework more closely with financing practices prevalent in the road infrastructure sector while retaining investor-protection safeguards through approval and disclosure requirements.
Implications for the InvIT ecosystem
SEBI’s consultation paper proposes a targeted modification to the NDCF framework applicable to the road-sector InvITs by permitting debt-funded major maintenance expenditure to be added back for NDCF computation, subject to extensive governance, approval and disclosure safeguards.
Rather than representing a broad relaxation of the principle against debt-funded distributions, the proposal is structured as a narrowly tailored exception for a specific category of expenditure that is intrinsic to the lifecycle of road assets and therefore a direct positive impact is expected on returns for unitholders of a road-sector InvIT. If implemented, the changes could influence distribution profiles, leverage management practices and asset monetisation strategies across the road InvIT ecosystem in India while maintaining enhanced transparency for unitholders and institutional investors. Not to forget, road sector InvITs dominate the InvIT practice in India.
Going forward, the stakeholders can expect representations from other InvIT sectors on similar challenges they face. SEBI’s willingness to engage with and understand the issues faced by InvITs in India is notable, as is the ease and pace with which the amendments have been introduced and continued to be implemented.
This Prism has been prepared by:
|
Arka Mookerjee |
Sourav Modi |
For more details, please contact [email protected].
On May 21, 2026, the Securities and Exchange Board of India (“SEBI”) issued a consultation paper proposing changes to the existing price discovery framework applicable to Initial Public Offering (“IPO”) and re-listed scrips during the pre-open call auction session on the date of IPO listing or re-listing.
Please click here to read the full article by Arka Mookerjee, Partner and Pracheta Bhattacharya, Partner, published in Mondaq.
The article explains that share buybacks are regaining popularity in India after recent tax reforms restored their attractiveness. Companies use buybacks to return surplus cash, signal confidence in undervalued stock prices, and enhance shareholder value. A key change effective from April 1, 2026, taxes only the gains from buybacks as capital gains rather than treating the entire proceeds as dividend income. This provides greater clarity and fairness for investors while preserving buybacks as an efficient capital allocation tool, leading to renewed corporate interest in the route.
Please click here to read the full article by Raj Ramachandran, Partner, published in News9.
Please click here to download the Prism as a PDF.
On May 21, 2026, the Securities and Exchange Board of India (“SEBI”) issued a consultation paper proposing changes to the existing price discovery framework applicable to Initial Public Offering (“IPO”) and re-listed scrips during the pre-open call auction session on the date of IPO listing or re-listing. The consultation paper seeks public comments on the existing mechanisms relating to base price determination, dummy price bands, and equilibrium price discovery.
The proposal aimed at discussing concerns relating to price discovery in IPO and re-listed securities and proposes changes to the existing framework, addressing concerns around artificially suppressed price discovery and trading inefficiencies observed during the call auction process for IPO and re-listed securities.
SEBI had originally introduced the call auction session mechanism for IPO and re-listed scrips through a circular dated January 20, 2012. Certain provisions were subsequently modified through a circular dated June 20, 2024, which now forms part of the SEBI Master Circular for Stock Exchanges and Clearing Corporations.
It is noted that the call auction session currently operates for 60 (sixty) minutes between 9:00 a.m. and 10:00 a.m., with separate periods allocated for order entry, matching, trade confirmation, and buffer period for transition to normal trading. Further, there is presently no price band during the call auction session, and only limit orders are permitted.
The stock exchanges currently follow different methodologies for determining the base price of IPOs, re-listed scrips, direct listings, and securities undergoing corporate restructuring. The consultation paper also outlines the existing framework relating to dummy price bands, including their flexing mechanism and operation during the call auction session.
SEBI notes that representations have been received stating that the existing dummy price band framework and the mechanism for determining the base price in re-listed scrips may lead to artificially suppressed price discovery. According to the consultation paper, such suppressed price discovery may subsequently result in persistent buying pressure during normal market trading, continuous upper circuits, and imposition of Additional Surveillance Measures (“ASM”).
The consultation paper further records that, in one instance, 90% of buy orders during the call auction session of a re-listed scrip were rejected for being outside the prescribed price bands.
SEBI has also observed that, in cases where revocation of suspension occurs after more than one year, the current framework often results in the base price beginning at INR 10 (Indian Rupees ten) due to reliance on book value or face value criteria.
Additionally, the consultation paper notes that Small and Medium Enterprise (“SME”) IPOs presently operate with a fixed price band of +90% without any flexing mechanism despite the volatility associated with SME-listed securities.
Revision of the base price determination mechanism
SEBI has proposed continuation of the existing base price mechanism for IPOs, direct listings, securities admitted under the permitted category, and securities undergoing corporate restructuring.
However, in relation to re-listed scrips, SEBI has proposed a revised methodology depending upon the duration of suspension.
Where revocation occurs within 6 (six) months from suspension, the base price may be determined using:
Where revocation occurs after 6 (six) months from suspension, the consultation paper proposes that the base price should be determined using valuation certificates issued by 2 (two) independent chartered accountants or valuation agencies.
Changes to the dummy price band flexing mechanism
SEBI has proposed continuation of the existing dummy price band mechanism for IPOs, SME IPOs, and re-listed scrips.
The consultation paper proposes automatic flexing of dummy price bands by 10% whenever the indicative equilibrium price approaches the upper or lower threshold. Further, where orders are present only on one side of the dummy price band, flexing may occur after validation of orders from at least 5 (five) Permanent Account Number (“PAN”) based unique investors.
SEBI has also proposed that:
Price discovery proposals
The consultation paper proposes continuation of the existing methodology for the determination of equilibrium price and common equilibrium price (“CEP”).
However, SEBI has proposed that a call auction session should be treated as successful only if price discovery is based on orders from at least 5 (five) PAN-based unique buyers and sellers.
Further, where the call auction is unsuccessful:
| Aspect | Current framework | Proposed framework |
| Base price – IPOs | Issue price is used as the base price for the pre-open call auction session. | No change proposed. Issue price will continue to be the base price. |
| Base price – re-listed scrips (revocation within specified period) | Latest close price may be used. Where suspension exceeds 1 (one) year, base price may be determined based on book value or face value, whichever is lower. | Latest close price not older than 6 (six) months on the relevant exchange; failing which, latest close price on another exchange; failing which, lower of valuation certificates issued by 2 (two) independent chartered accountants or valuation agencies. |
| Base price – re-listed scrips (long suspension period) | Lower of book value or face value (subject to existing exchange framework). | Lower of valuation certificates issued by 2 (two) independent chartered accountants or valuation agencies. |
| Dummy price bands | Existing dummy price band mechanism applies to IPOs and re-listed scrips. SME IPOs operate with a fixed band without flexing. | Existing dummy price band mechanism to continue for IPOs, SME IPOs and re-listed scrips. |
| Flexing of dummy price bands | Auto-flexing and manual flexing based on existing exchange-level processes. Flexing does not operate during the random closure period. | Automatic flexing by 10% under specified conditions, with uniform implementation across exchanges. Flexing to continue during the random closure period. |
| One-sided order build-up at band limits | Manual intervention may be required for flexing. | Flexing may occur after validation of orders from at least 5 (five) PAN-based unique investors at the upper or lower band limit. |
| Successful price discovery | Equilibrium price may be discovered under the existing framework without a minimum participation threshold. | Call auction session to be considered successful only if price discovery is based on orders from at least 5 (five) PAN-based unique buyers and 5 (five) PAN-based unique sellers. |
| Equilibrium price/CEP methodology | Existing methodology for determination of equilibrium price and CEP. | No change proposed. Existing methodology to continue. |
| Failure of price discovery – IPOs | IPO scrip moves to normal market at the issue price where price discovery is unsuccessful. | No material changes proposed. IPO scrip would move to the normal market at the issue price. |
| Failure of price discovery – re-listed scrips | Existing framework governs continuation of the call auction process. | Call auction session to continue on subsequent trading days until equilibrium price is determined. |
SEBI’s proposed review of the pre-open call auction mechanism for IPO and re-listed scrips appears directed toward improving the efficiency and credibility of price discovery during IPO listing and re-listing events.
By proposing revisions to the base price determination framework and dummy price band flexing mechanisms, SEBI attempts to strike a balance between risk management and efficient market-driven price discovery.
The consultation paper also reflects SEBI’s broader focus on strengthening market infrastructure and ensuring orderly trading behaviour in newly listed and re-listed securities.
This Prism has been prepared by:
|
Arka Mookerjee |
Pracheta Bhattacharya |
For more details, please contact [email protected].
JSA Advocates & Solicitors (JSA) advised J.P. Morgan Securities plc, The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank, as arrangers and dealers, in connection with the update of IIFL Finance Limited’s US$ 1 billion secured Global Medium Term Note Programme. The updated programme provides a platform for IIFL Finance Limited to issue notes from time to time in the international debt capital markets.
IIFL Finance Limited is a leading non-banking financial company in India, offering a diversified range of lending and financial products, including gold loans, home loans, business loans, microfinance, and capital market finance solutions.
The transaction was led by Arka Mookerjee, Partner, and Soumitra Majumdar, Partner. The Capital Markets team comprised Pracheta Bhattacharya, Partner and Aditya Sureka, Associate. The Banking & Finance team comprised Deboshree Mukherjee, Principal Associate.
JSA Advocates & Solicitors (JSA)advised as lenders’ counsel to the consortium of lenders in connection with term loan facilities aggregating INR 1,500 crores availed by Tega Industries Limited, a publicly listed company.
The proceeds of the facility will be utilised by Tega Industries Limited for the acquisition of the Molycop Group from American Industrial Partners for USD 1.45 billion.
The transaction was led by Tirthankar Datta, Partner. The team further comprised Sucheta Bhattacharya, Partner; Ciol Kumar, Senior Associate; and Aaditya Shukla, Associate.
JSA Advocates & Solicitors (JSA) advised National Bank for Financing Infrastructure and Development (NaBFID) in relation to rupee term loan facilities aggregating up to INR 1,500 crores made available to Citius TransNet Investment Trust, the road InvIT platform managed by EAAA TransInfra Managers Limited, part of theEAAA Alternatives group.
The transaction was led by Karan Mitroo, Partner, and supported by Pragya Verma, Senior Associate, and Jhalak Gupta, Associate.
Securities and Exchange Board of India (“SEBI”), on May 15, 2026, has issued a circular liberalising end-uses of certain borrowings by Infrastructure Investment Trusts (“InvITs”). Following the broad enabling amendments approved during its board meeting on March 23, 2026, and officially notified on April 17, 2026, SEBI issued 2 (two) definitive operational circulars on May 15, 2026.
Please click here to read the full article by Soumitra Majumdar; Partner, published in Mondaq.
JSA Advocates & Solicitors (JSA) advised HDFC Bank Limited on INR 1,940 crores financing availed by Indus Infra Trust, the road InvIT platform backed by GR Infra, for the purpose of, inter alia, refinancing of the existing debt availed by the new SPVs acquired by the InvIT.
The transaction was led by Karan Mitroo, Partner, and supported by Pragya Verma, Senior Associate; Jhalak Gupta, Associate, and Harsh Dugar, Associate.
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