The Indian infrastructure landscape, driven by ambitious government initiatives and burgeoning capital markets, has seen the rise of Infrastructure Investment Trusts (“InvITs”) as a crucial financing vehicle. Initially, many InvITs commenced their journey as privately placed instruments, attracting sophisticated institutional investors. However, with the evolving regulatory environment and the increasing demand for listed infrastructure assets, the pathway for converting a private listed InvIT into a public InvIT has gained significant traction. This article explores the strategic rationale behind such conversions, unpacks the evolving regulatory landscape, and analyzes the legal and operational considerations critical to successfully navigating this transition.

The Strategic Imperative: Why Go Public?

Before delving into the "how," it’s crucial to understand the "why." The decision for a private InvIT to transition to a public one is typically driven by a confluence of strategic and financial objectives:

• Access to a Wider Capital Pool:

Private InvITs typically rely on a limited set of institutional or high-net-worth investors. Going public unlocks a significantly broader investor base, including retail investors, mutual funds, and foreign portfolio investors. This substantially enhances the InvIT’s capacity to raise substantial capital for future acquisitions, project expansions, and debt reduction. Furthermore, it diversifies funding sources, reducing the concentration risk that comes with reliance on a few large private investors.

• Improved Liquidity for existing unitholders:

Private InvIT unitholders often face restricted options for exiting their investments. A public listing provides a regulated, transparent, and active trading platform, enabling existing unitholders, such as sponsors and initial investors, to monetize their investments more easily and potentially at better valuations. Public markets also facilitate efficient price discovery through supply and demand dynamics, ensuring a fair valuation for the InvIT’s units.

• Enhanced Transparency and Governance:

Public listing mandates adherence to stricter regulatory requirements, resulting in greater transparency in financial reporting, operational disclosures, and overall corporate governance practices. This increased transparency and regulatory oversight associated with public listing instills greater confidence among a wider investor base, particularly institutional investors who place a high premium on strong governance.

• Brand Building and Reputation:

A public listing substantially raises the InvIT’s profile and brand recognition within the financial community and among potential partners. This heightened visibility can attract better talent, foster stronger business relationships, and open doors for new opportunities. Being a publicly traded entity also often confers a higher degree of credibility and trust in the market, which benefits the InvIT in its interactions with lenders, government bodies, and other crucial stakeholders.

Still why Direct Conversions of Private InvITs to Public InvITs are less common?

Despite the existence of a regulatory framework facilitating the conversion of private InvITs into public ones, such transitions have remained rare in the Indian market. This hesitation stems from a combination of structural, regulatory, and commercial considerations that collectively make the direct conversion route less attractive than launching a fresh public InvIT.

• To begin with, private InvITs were originally conceptualized as vehicles tailored to meet the needs of a limited and sophisticated investor base—typically pension funds, sovereign wealth funds, and domestic institutions. These investors value operational flexibility, minimal disclosure obligations, and lower public scrutiny.
• From a regulatory standpoint, significant hurdles have historically disincentivized direct conversions. Chief among them were the mandatory lock-in requirements imposed on both sponsors and existing private investors during the conversion process. For instance, a sponsor’s minimum contribution (15%) was subject to a three-year lock-in, while additional sponsor holdings and even non-sponsor units were subject to varying lock-in periods.
• Furthermore, the increased compliance burden associated with transitioning to a public InvIT cannot be overlooked. Public listing entails adherence to a rigorous regime of continuous disclosures, detailed offer documentation, stricter corporate governance norms, and oversight by multiple regulators. For sponsors accustomed to the relative flexibility of private structures, this leap in compliance obligations represents a significant shift in operational dynamics and administrative overhead.
• There are also commercial and strategic considerations at play. In many cases, infrastructure developers and sponsors find it more efficient to set up a fresh public InvIT and launch an IPO, rather than restructure a private vehicle midstream. This clean-slate approach offers greater control over the sequencing of asset transfers, investor onboarding, and timing of the capital raise. It also avoids entanglement with legacy agreements, investor rights, and internal governance frameworks that may not align with public market norms.

However, the situation is evolving. As of August 2025, SEBI has approved amendments to simplify the conversion process by reducing lock-ins and streamlining disclosure norms. These changes are expected to lower barriers and make direct conversions more appealing, likely leading to more private InvITs transitioning to public status soon.

Amendments Introduced (SEBI Circular dated August 08, 2025):

SEBI, on August 08, 2025, has approved significant amendments to the Master Circular for InvITs dated May 15, 2024, thereby relaxing various norms related to conversion of private InvITs into public. These changes are as below:

• Relaxation of lock-in requirements: This is unarguably the most impactful change. SEBI has relaxed the existing lock-in provisions for:
• Minimum Sponsor contribution (15%): The rationale is that sponsors are already subject to a perpetual unitholding requirement (introduced in August 2023 amendments), ensuring long-term commitment.
• Sponsor’s units in excess of minimum contribution.
• Units held by non-sponsor unitholders prior to the issue. This relaxation aims to significantly enhance liquidity for existing unitholders and remove a major hurdle for institutional investors in private InvITs.
• Alignment with Follow-On Public Offer (FPO) norms: SEBI has aligned the procedure and disclosure requirements for the public issue of units during conversion with those applicable to a follow-on public offer (FPO), rather than an initial public offer (IPO). This recognizes that the InvIT is already a listed entity (albeit privately) with a track record, streamlining the disclosure process and potentially reducing the time and cost associated with the offer document.
• Streamlined sponsor contribution: This aims to streamline requirements pertaining to minimum contribution from sponsor(s) and sponsor group(s) in the public issue, referencing existing Regulation 12 of the InvIT Regulations for perpetual unitholding obligations.

Examples of structures similar to conversion:

While direct "private to public InvIT conversion" examples are still relatively nascent given the InvIT market’s evolution, we can look at instances that highlight the underlying principles:

• IRB InvIT Fund: IRB Infrastructure Developers, a major road developer, created this InvIT to monetize a portfolio of its operational road assets. While the InvIT itself was launched publicly, the underlying assets effectively moved from a private developer’s balance sheet to a publicly listed trust. This fits the spirit of "conversion" in terms of unlocking value from privately held assets for public investors.
• IndiGrid (India Grid Trust): Similar to IRB InvIT, IndiGrid, backed by Sterlite Power Grid Ventures Ltd. (now part of Sterlite Power Transmission Limited), was formed to own inter-state power transmission assets. The underlying principle of sponsors monetizing operational assets through a publicly listed trust to unlock capital is relevant.
• Powergrid Infrastructure Investment Trust (PGInvIT): This was sponsored by Power Grid Corporation of India Limited (a public sector undertaking) to monetize its transmission assets. It also represents bringing previously held assets into a public InvIT.
• TVS Infrastructure Trust (Listed July 2025): TVS Industrial & Logistics Parks successfully listed this warehousing InvIT, marking a significant move of warehousing assets into a public InvIT structure.

These are strong examples of how private infrastructure asset portfolios (held by sponsors/developers) are effectively "converted" into publicly investable instruments through the InvIT IPO route.