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Institutional investors may get seat at InvITs’ manager boards

The finance ministry is working on a proposal to allow private institutional investors secure a board representation in the government-backed Infrastructure Investment Trusts (InvITs) managers following their investment in these collective investment vehicles.

The move is expected to help attract more interest from large global funds to acquire a stake in these InvITs, which are part of the government’s national monetisation programme. The government is looking to monetise income-producing assets of the urban development, railways and petroleum ministries and will soon finalise the list of such assets, a senior finance ministry official told ET.

“It is certain that if a large global entity or any institutional investor decides to invest in these entities (InvITs), they would seek participation in decision making and not remain a passive investor. A board representation for them will ensure they have a say in key decisions,” the official said.

The current regulatory framework is not conducive to allow induction of a private investor on the board of the government-sponsored InvITs manager irrespective of the size of their stake in the trust.

“Board seat on an InvIT investment manager (IM) is critical to ensure participation in decision making,” said Ruchir Sinha, managing partner of legal firm Resolut Partners. “Most matters are decided at the IM level, with only few critical matters being referred for unit holder votes. Large investors need certain governance rights including investor veto on certain high threshold matters, which tends to become difficult to achieve without a board seat, especially since special rights to select unit holders aren’t encouraged by the Sebi.”

The government has so far concluded fund raising through two such vehicles including the National Highways Authority of India (NHAI) and Power Grid-sponsored InvITs that attracted global investors like Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan Board.

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