SEBI Revises NDCF Framework for Debt-Funded Major Maintenance by Road InvITs

The Securities and Exchange Board of India (SEBI) has changed the framework used by Infrastructure Investment Trusts (InvITs) to calculate Net Distributable Cash Flow, commonly called NDCF. The change allows payments made for major maintenance of eligible road projects to be added back while calculating NDCF, but only to the extent that those payments are funded through external borrowing.

The amendment was issued through SEBI Circular No. HO/17/11/17(5)2026-DDHS-POD2/I/18791/2026, dated August 14, 2026. It took effect immediately. The circular modifies paragraph 3.19 in Section F of Chapter 3 of SEBI's July 11, 2025 Master Circular for InvITs.

The relaxation is relevant mainly to road-focused InvITs, their investment managers, trustees, HoldCos, special purpose vehicles (SPVs), statutory auditors and unitholders. It may make more cash available for distribution or other uses during the years in which major maintenance is financed by debt. However, this flexibility comes with safeguards: project-wise unitholder approval, detailed disclosures, statutory-auditor certification and separate reporting of the related borrowing.

Notification at a Glance

Regulatory Framework

An InvIT collects money from investors, and uses it to own, or run infrastructure assets. The cash earned from these assets is calculated under the Net Distributable Cash Flow framework to determine how much can be paid to unitholders.

Paragraph 3.19 of the SEBI Master Circular for InvITs dated July 11, 2025 sets out separate NDCF calculations for:

• HoldCo and SPV level, and
• Trust level.

The framework starts with relevant operating cash flows and makes specified additions and deductions. Before the new circular, expenditure paid toward major road maintenance would affect cash flow in the ordinary way. The framework did not contain the new, specific add-back for major maintenance payments funded by external borrowing.

SEBI’s InvIT rules were last amended on April 17, 2026. The August 2026 circular has been issued under Section 11(1) of the SEBI Act, 1992 and Regulation 33 of the InvIT Regulations.

The Master Circular also records the regulatory requirement that not less than 90% of the InvIT's NDCF must be distributed to unitholders. This makes the composition of NDCF commercially important. An item added to NDCF can affect the distributable base, even though actual distributions will continue to depend on the applicable regulations, the NDCF computation, the trust's distribution policy and the facts of the relevant reporting period.

Why SEBI Introduced the Change

SEBI states that it received a request from an industry association to review the NDCF framework so that debt-funded major maintenance expenditure could be added while calculating NDCF. The change followed recommendations from the Hybrid Securities Advisory Committee and a public consultation.

Road projects often have significant maintenance obligations under their concession agreements. Some of this work is periodic and materially different from routine maintenance. If an InvIT pays for that work through a loan, the cash payment reduces operating cash in the period even though the project has separately raised debt to fund the expenditure.

The revised rule changes how certain eligible expenses are treated. If the expense is paid using external debt, the eligible amount can be added back to NDCF. However, InvITs cannot use borrowed funds simply to increase the cash available for distribution. The benefit applies only in the specific cases covered by the circular.

What Has Changed in the NDCF Framework

SEBI has made four connected changes to paragraph 3.19 of the InvIT Master Circular.

1. New add-back at HoldCo or SPV level

The HoldCo/SPV calculation now includes an additional positive line item:

• Payments made toward major maintenance expense for road projects, to the extent funded by external borrowing, subject to Note 12.
• In practical terms, an eligible HoldCo or SPV can add the qualifying payment back while arriving at its NDCF. The add-back cannot exceed the portion actually funded by external borrowing.

2. New add-back at Trust level

The same type of line item has been inserted in the Trust-level NDCF calculation. This covers a situation in which qualifying major maintenance borrowing and payment are handled at the InvIT level rather than solely within an underlying SPV or HoldCo.

3. Changes to the rules on surplus cash and debt-funded distributions

Note 4 now recognises that surplus cash resulting from externally funded major maintenance payments for road projects may be distributed if Note 12 is satisfied and adequate disclosures are made.

Note 6 continues the general prohibition against a Trust or SPV distributing cash flows by taking external debt. It now expressly recognises the exceptions contained in Notes 2, 7 and the newly added Note 12. Working-capital or overdraft facilities used for treasury-management or working-capital purposes remain outside this restriction where they are squared off within the quarter, as specified in the circular.

4. Addition of Note 12

Note 12 contains the complete set of conditions governing the new add-back. These conditions deal with project eligibility, the meaning of major maintenance, unitholder approval, meeting disclosures, changes to approved borrowing, auditor certification and periodic reporting.

Old Position and Revised Position

The circular does not replace the complete NDCF framework. It inserts a targeted adjustment and related safeguards into the existing calculation.

Scope: Which InvITs and Projects Are Covered?

The change is meant for InvITs that have eligible road projects. It does not cover maintenance spending across all types of infrastructure. 

Under Note 12, a project must fall under the “Roads and bridges” infrastructure sub-sector listed in the Ministry of Finance notification dated September 19, 2025, including any later changes to that classification.

The treatment may operate at:

• InvIT or Trust level,
• HoldCo level, or
• SPV level.

What matters is that the expenditure and borrowing relate to a qualifying project, the payment meets the definition of major maintenance, and every applicable condition is fulfilled.

Routine road maintenance is not covered. Maintenance of infrastructure outside the referenced roads-and-bridges sub-sector is also not brought within the add-back merely because it involves a large cost.

Key Definitions

These definitions clarify which projects, maintenance costs and borrowings can qualify under the new framework and help avoid confusion during classification.

• Road Project

A road project means a project falling within the “Roads and bridges” infrastructure sub-sector referred to in the Ministry of Finance notification dated September 19, 2025, along with any later amendment or addition.

• Major Maintenance Expense

Major maintenance means expenditure on maintaining a road project that:

• is not routine maintenance, and
• is incurred in accordance with the obligations and requirements stated in the project's concession agreement.

Both elements matter. A high-value payment does not automatically become major maintenance. The nature of the work and its connection to the concession agreement must support that classification.

• External Borrowing

The circular uses the expressions “external debt” and “external borrowing” for funding raised for major maintenance. It does not prescribe a separate interest-rate limit, repayment period or lender category for the new NDCF treatment. Other applicable borrowing provisions, financing documents and InvIT leverage requirements therefore continue to matter.

How the NDCF Add-Back Works

The adjustment can be understood through three linked questions.

1. Was a qualifying payment made?

The add-back relates to payments actually made toward eligible major maintenance. A proposed future expense or a general maintenance provision is not described as eligible merely because borrowing has been planned.

2. How much was funded by external borrowing?

Only the debt-funded portion can be added back. If the expense is partly funded through external debt and partly through operating cash or another source, the circular permits the add-back only to the extent of the external borrowing.

3. Have all Note 12 safeguards been met?

The InvIT must have the required unitholder approval, project-specific disclosures, statutory-auditor certification and ongoing reporting. The add-back is conditional, it is not an automatic accounting adjustment available simply because a loan, and maintenance payment exist.

The circular does not provide a new numerical formula for allocating mixed funding sources. The InvIT should therefore maintain clear records capable of establishing the connection between the borrowing, the project and the payment.

Unitholder Approval and the 60% Voting Requirement

Before adding back the eligible payment, the InvIT must obtain unitholder approval under regulation 22(5) of the InvIT Regulations.

The resolution must receive votes in favour equal to at least 60% of the total votes cast on that resolution. This is a threshold based on votes cast, not the total number of issued units.

Approval must be obtained for each project for which the investment manager proposes to raise borrowing for major maintenance payments. This applies whether the project is held at the Trust, SPV or HoldCo level.

The approval may be structured in either of two ways:

1. A one-time approval for debt already raised or proposed to be raised for the project's complete life cycle, or
2. Approval for a specific major maintenance expense.

If the approved proposal later changes and the deviation requires additional debt, fresh unitholder approval must be obtained before the additional borrowing is taken.

This project-wise approach prevents a broad approval for one asset from being treated as approval for unrelated maintenance borrowing across an entire InvIT portfolio.

Information Required in the Explanatory Statement

The explanatory statement accompanying the notice of the unitholder meeting must give investors enough information to understand the borrowing decision and its likely effect.

It must disclose, among other matters:

• Project and borrowing details

• Names and details of the projects, SPVs or HoldCos concerned,
• Whether the major maintenance debt is proposed or has already been raised, and
• Whether borrowing is at Trust, HoldCo or SPV level.

• Expense categories

The statement must identify every category of expenditure that will be treated as major maintenance.

• Estimated maintenance expenditure

It must provide indicative year-wise and project-wise estimates of major maintenance expenditure for which borrowing is proposed. These estimates may need to be based on the latest available valuation report, as stated in the circular.

• Effect on growth capacity

The statement should also mention whether this borrowing could limit the InvIT's ability to raise more debt later. Money borrowed for major maintenance adds to the InvIT's total debt, which may leave less borrowing capacity for new projects or expansion.

• Effect on unitholder distributions

The present and future effects on distributions must be disclosed wherever applicable. The circular recognises two different stages:

• In the years before major maintenance is carried out, distributions may be higher if no maintenance reserve is built up.
• After the loan is taken, annual distributions may be lower to the extent that cash is needed for repayment under the lender-agreed schedule.

• Alternative funding arrangements

The statement must explain what other funding options are available if debt cannot be raised in the future. Where relevant, unitholders should be told that operating cash may have to be used for major maintenance and that future distributions may be affected.

These disclosures help investors understand what the change could mean. Any short-term increase in available cash should be looked at alongside the higher borrowing cost and the reduced room for taking on more debt later.

Statutory Auditor Certification

An InvIT cannot rely only on an internal classification of the expense. A certificate from the statutory auditor must confirm that:

• The maintenance expense is consistent with the major maintenance obligations and requirements in the concession agreement, and
• The relevant payments were funded through external borrowing.

Only payments certified by the InvIT's statutory auditor may be added back for NDCF purposes under this framework.

The statutory auditor may rely on an independent expert when assessing whether the work is consistent with the major maintenance obligations in the concession agreement. The circular permits such reliance but does not remove the need for the statutory auditor's certificate.

This makes proper documentation important. The records should clearly show why the work was required, what work was carried out, the invoices and payments, the loan received and where the borrowed money was used.

Periodic Reporting and Disclosure Requirements

InvITs must continue reporting the borrowing after it has been approved and raised. The details have to be shown separately in the financial results and, where applicable, in the annual, half-yearly and quarterly reports.

The reporting obligation is not limited to the period in which unitholders approve the borrowing. Outstanding debt and its maturity profile continue to matter while the liability remains on the books.

What Is Permitted and What Remains Restricted

The circular should not be read as a general permission to borrow money for distributions.

• Permitted under the new exception

An eligible payment for major maintenance of a qualifying road project may be added back to NDCF to the extent funded by external borrowing, provided every Note 12 condition is satisfied.

• Still restricted

A Trust or SPV cannot ordinarily create distributable cash flow simply by raising external debt. Note 6 preserves that rule except for the specific situations identified in Notes 2, 7 and 12.

Routine maintenance, non-road infrastructure maintenance, unsupported expense classifications and amounts not funded through external borrowing do not qualify under the new road-maintenance add-back.

Impact on InvITs and Unitholders

The new treatment can affect InvITs in several ways, from near-term cash availability to future borrowing capacity, and investor returns.

• Immediate impact on cash availability

The add-back can prevent the eligible, debt-funded maintenance payment from reducing NDCF in the same way it otherwise would. This may leave more cash available for distribution or other permitted uses during the relevant period.

The effect is conditional and fact-specific. It depends on the eligible amount, source of funding, NDCF calculation and satisfaction of Note 12.

• Impact on leverage headroom

Major maintenance borrowing forms part of the InvIT's aggregate debt. A higher debt balance can reduce the capacity to borrow later for acquisitions, asset expansion or other growth plans.

An InvIT evaluating the new treatment should therefore consider more than the immediate distribution effect. It must weigh the use of debt for maintenance against competing uses of its available leverage.

• Impact on future distributions

Borrowing can help meet major maintenance costs when the InvIT has not kept enough funds aside. The loan and its financing costs will still need to be paid back. As a result, the cash available for distributions may be lower in later years.

• Impact on governance and administration

Investment managers will have to keep proper records of project approvals, maintenance expenses, borrowings and audit documents. For InvITs managing several road projects, this may also require closer coordination between project companies, finance teams, trustees, auditors, and other advisers.

• Impact on unitholder decision-making

Unitholders will vote on the proposed borrowing for major maintenance. The explanatory statement should give them enough information to assess the immediate cash benefit against the future repayment burden and the reduction in available borrowing capacity.

What InvITs and Investment Managers Should Do Next

For InvITs and investment managers, the next step is to translate the new framework into clear project-level checks, approvals, records and reporting processes.

1. Identify potentially eligible projects

Map each asset against the “Roads and bridges” infrastructure sub-sector referenced in Note 12. Do not rely on a broad description such as transport infrastructure.

2. Review concession-agreement obligations

Separate routine maintenance from contractual major maintenance. Document the clause, schedule, or technical requirement supporting the proposed classification.

3. Map the proposed funding route

Identify whether borrowing will be raised at Trust, HoldCo or SPV level. Record how loan proceeds will be connected to the relevant project and payment.

4. Prepare project-wise financial estimates

Compile year-wise and project-wise maintenance estimates, using the latest available valuation report where relevant. Assess debt maturity, repayment pressure and the effect on leverage headroom.

5. Obtain Unitholder Approval

The required notice and explanatory statement should cover all disclosures specified under Note 12. Approval should be taken for the specific project before the add-back is used. If a later change requires additional borrowing, fresh approval should be obtained before taking the additional debt.

6. Keep Documents Ready for Audit

Maintain the concession agreement, technical documents, expert reports where applicable, contracts, invoices, payment records and loan documents. The records should also show when the loan was drawn and how the funds were used so the statutory auditor can verify the transaction.

7. Update the NDCF Calculation

The new add-back should be recorded at the appropriate Trust, HoldCo or SPV level. Only the eligible amount that has been certified and paid through external borrowing should be included.

8. Update periodic disclosure controls

Revise financial-results and report templates so that the Net Borrowing Ratio, period borrowing, outstanding debt and maturity profile separately identify major maintenance debt.

9. Monitor approved limits and deviations

Track actual borrowing and expense against the unitholder-approved proposal. Escalate any deviation that requires additional debt before the new borrowing is taken.

Compliance Checklist

The following checklist covers the main compliance steps InvITs should review before using the new treatment for major maintenance expenses.

• Confirm that the project falls under the specified roads-and-bridges sub-sector. 
• Check that the expense is non-routine maintenance required under the concession agreement. 
• Identify the portion of the payment funded through external borrowing. 
• Confirm whether the borrowing is at the Trust, HoldCo or SPV level. 
• Prepare project-wise and year-wise cost estimates. 
• Review the effect on leverage, future borrowing and distributions. 
• Explain other funding options if debt is not available. 
• Prepare the unitholder meeting notice and explanatory statement. 
• Obtain at least 60% approval of the votes cast on the resolution. 
• Obtain separate approval for each project. 
• Get fresh approval before taking additional debt due to a deviation. 
• Obtain the statutory auditor's certificate. 
• Keep records showing how the borrowed funds were used for maintenance.
• Add back only the eligible amount covered by the required certification.
• Reflect the borrowing in financial results and other required reports.
• Report major maintenance debt separately in the Net Borrowing Ratio and debt maturity details.

How Corpseed Can Help

Applying the revised NDCF framework requires coordination between regulatory, financial, contractual and disclosure workstreams. A weak link in project classification, approval documentation or the fund-flow record can create questions around the eligibility of the add-back.

Corpseed can support affected entities with InvIT regulatory compliance services such as:

• Reviewing the circular and preparing an applicability note,
• Organising a project-wise compliance and responsibility matrix,
• Reviewing concession-agreement provisions relevant to major maintenance,
• Preparing approval and disclosure checklists for the unitholder process,
• Supporting compilation of regulatory and auditor documentation,
• Mapping recurring disclosures for financial results and periodic reports, and
• Establishing a tracker for approved borrowing, actual drawdowns, expenditure and outstanding debt.

The investment manager, trustee, statutory auditor and legal or financial advisers will continue to perform their respective regulated and professional roles. Corpseed's support can help organise the compliance process and documentation so that the responsible parties have a clear, consistent record for review and decision-making.

Key Takeaways

SEBI has created a focused exception in the InvIT NDCF framework for major maintenance payments on eligible road projects. The qualifying payment can be added back at HoldCo/SPV or Trust level to the extent it is funded by external borrowing. The circular has applied since August 14, 2026.

• The relief is limited to qualifying road projects and non-routine maintenance required under the concession agreement.
• Project-wise unitholder approval must be obtained with at least 60% of votes cast supporting the resolution.
• The explanatory statement must disclose the borrowing, expense estimates, growth impact, distribution effect and funding alternatives.
• A statutory-auditor certificate is mandatory before the eligible payment is added back.
• Major maintenance borrowing must be separately disclosed in the Net Borrowing Ratio, NDCF notes and debt maturity profile.
• The change may support near-term cash availability, but it can reduce future leverage headroom and affect later distributions.