The Securities and Exchange Board of India (SEBI) proposed changes on Monday that would allow road-focused Infrastructure Investment Trusts (InvITs) to add debt-funded major maintenance expenses back into their calculations of cash available for distribution to investors, a move aimed at facilitating business operations.
According to the proposal, InvITs will be able to include payments for major maintenance of road projects, as long as these are funded by external borrowings, in their Net Distributable Cash Flow (NDCF) calculations. NDCF serves as a key metric to determine the sum available for distribution to unit holders.
Currently, InvITs cannot distribute cash flows that originate from external debt. Furthermore, major maintenance expenses are classified as operating costs under existing accounting regulations and are deducted from operating cash flows when calculating NDCF, thereby reducing the cash available for distribution—even if the expenses are covered by loans.
SEBI stated that this proposal came after requests from the Bharat InvITs Association and suggestions from the Hybrid Securities Advisory Committee.
Concession Obligations
Major maintenance encompasses non-routine costs incurred to preserve road assets as mandated by concession agreements. SEBI pointed out that “major maintenance expenses are treated as operating expenses, although the total amount over the life of the project is generally significant and essential for maintaining road assets in compliance with the specifications of the concession agreement.” The draft paper seeking public comments notes that feedback is requested until June 22.
The suggested changes would apply specifically to projects categorized under the roads and bridges infrastructure sub-sector. However, InvITs must obtain prior approval from unit holders before incurring debt for such expenses, which can be secured either for the entire lifecycle of the project or for specific maintenance initiatives.
Disclosure Norms
Additionally, SEBI proposed rigorous disclosure requirements, which would include project-specific maintenance estimates, assessments of how maintenance-related borrowings could impact future growth and distributions, and alternative funding options if debt is inaccessible. Statutory auditors would need to verify that expenditures qualify as major maintenance and have been funded via external borrowing.
InvITs will also be required to disclose any maintenance-related borrowings in their debt maturity profiles, leverage ratios, and NDCF reports.
Published on June 1, 2026.
