Revised framework for computation of Net Distributable Cash Flow (NDCF) by Infrastructure Investment Trusts (InvITs)
Summary
This circular establishes a revised standardized framework for computing Net Distributable Cash Flow (NDCF) by Infrastructure Investment Trusts and their HoldCos/SPVs. The new rules supersede previous guidelines in the Master Circular and become applicable from April 1, 2024. It details specific calculation methodologies for both SPV and Trust levels, including adjustments for taxes, debt repayments, and capital expenditures.
Text
Regulation 18(6) of SEBI (Infrastructure Investment Trust) Regulations, 2014 provides that the Net Distributable Cash Flow (NDCF) shall be computed at the level of InvIT and HoldCo/SPV. Further, the minimum distribution shall be 90% of the NDFC at the Trust level as well as the HoldCo/SPV level, subject to applicable provisions in the Companies Act, 2013 or the Limited Liability Partnership Act, 2008.
In order to promote Ease of Doing Business, it has been decided to standardize the framework for calculation of available Net Distributable Cash Flows. Accordingly, the revised framework for computation of NDCF by InvITs and its Holdcos/SPVs shall be as per Annexure A.
The revised framework shall be applicable with effect from April 1, 2024 and supersedes the Framework for calculation of Net Distributable Cash Flows provided in Paragraph F of Chapter 3 of the Master Circular for Infrastructure Investment Trusts (InvITs) dated July 06, 2023.
Computation includes cash flow from operating activities, plus cash flows received from lower-level SPVs, treasury income, and adjusted proceeds from sale of infrastructure investments. Deductions include finance costs on borrowings, debt repayment, reserves required under loan agreements or covenants, and capital expenditure on existing assets not funded by debt/equity/reserves.
Computation includes cashflows from operating activities of the Trust, plus cash flows received from SPVs/Investment entities, treasury income, and adjusted proceeds from sale of assets. Deductions include finance cost on Borrowings, debt repayment at Trust level, reserves required under various agreements/covenants, and capital expenditure on existing assets owned/leased by the InvIT.
NDCF computed at SPV level for a particular period to be added under this line item, even if the actual cashflows from SPV to InvIT has taken place post that particular period, but before finalization and adoption of accounts of the InvIT.
The option to retain 10% distribution under Regulation 18(6) needs to be computed by taking together the retention done at SPV level and Trust level.
Trust along with its SPVs needs to ensure that minimum 90% distribution of NDCF be met for a given financial year on a cumulative periodic basis as specified for mandatory distributions in the InvIT regulations.
Surplus cash available in SPVs due to withheld NDCF, acquisition surplus, or other reasons excluding debt raises could be considered for distribution by the SPV to the InvIT, or by the Trust to its Unitholders in part or in full, but needs to be disclosed separately in the NDCF computation and Distribution.
Similarly, any restricted cash (disclosed as such) should not be considered for NDCF computation by the SPV or InvIT (e.g. unspent CSR balance for any year deposited in a separate account as per Companies Act which will be utilized in subsequent years, DSRA reserve, major maintenance reserve etc).
Further, it is expressly provided that no Trust or SPVs can distribute any cashflows by obtaining external debt, except to the extent clarified in note 2 above (this will exclude any working capital / OD facilities obtained by Trust/ SPVs as part of Treasury management / working capital purposes as long as they are squared off within the quarter).
Proceeds from sale of infrastructure investments... intended to be reinvested... could be temporarily parked in Overdraft accounts or used to repay any additional/ unrelated debt. Further if such proceeds are not intended to be reinvested... then redrawing such temporarily parked funds to distribute such net proceeds will not be considered as a contravention of note 7 above.
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Source: SecMarx — Revised framework for computation of Net Distributable Cash Flow (NDCF) by Infrastructure Investment Trusts (InvITs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.