Sebi Revises InvIT Cash Flow Rules To Allow Debt-Funded Road Maintenance Costs In NDCF Calculation

On August 14, 2026, the Indian markets regulator Sebi announced a revised framework for how Infrastructure Investment Trusts (InvITs) can calculate their net distributable cash flow (NDCF). This change allows InvITs to include payments made towards major maintenance expenses for road projects funded through external debt when determining NDCF.

The primary goal of this revision is to give InvITs more flexibility in managing significant maintenance requirements for road projects without reducing the cash available for distribution to InvIT shareholders, known as unitholders.

Under the new guidelines, InvITs can add back these maintenance expenses to the NDCF calculation at both the special purpose vehicle (SPV)/holding company level and the trust level. However, before InvITs can raise debt specifically for major maintenance expenses, they must obtain approval from the unitholders. This approval is required for each individual project where the investment manager intends to utilize such debt.

The regulator clarified that this one-time approval can cover debt already taken or planned for the entire project life cycle, or for a specific major maintenance expense. Any additional borrowing beyond this would necessitate fresh approval from the unitholders.

In addition to the NDCF adjustments, InvITs will need to disclose comprehensive details about any proposed debt for major maintenance expenses. This includes specifying the projects, the categories of maintenance expenses, the estimated costs, and the potential impact on the InvIT's future growth and distributions. A statutory auditor will be required to certify that the maintenance expenses align with the concession agreements and have been financed through external borrowings.

InvITs are also mandated to separately disclose the borrowing for these maintenance expenses in their financial and periodic reports, with their debt maturity profiles highlighting such borrowings distinctly.

Sebi emphasized that InvITs cannot distribute cash flows by raising external debt, except in specified instances. Exclusions include working capital or overdraft facilities used solely for treasury or working capital purposes if they are settled within the quarter. The revised framework is set to take effect immediately, as per Sebi's announcement.