The Securities and Exchange Board of India (SEBI) issued an enabling circular on 15 May 2026 addressing a long-standing structural problem for Infrastructure Investment Trusts (InvITs) — the regulatory status of Special Purpose Vehicles (SPVs) after an infrastructure project concession (or similar agreement) concludes or is terminated. SEBI’s circular, bearing number SEBI/HO/DDHS/DDHS-PoD-2/I/11698/2026, clarifies that the conclusion or termination of a concession agreement will not, by itself, affect the status of an SPV holding an infrastructure project under the InvIT Regulations, subject to specified conditions, including a one-year exit or reinvestment framework and enhanced disclosures. It adds a proviso to preserve SPV status under the SEBI (InvIT) Regulations, 2014 to ensure that InvITs have regulatory clarity when a concession (or similar agreement) in respect of an infrastructure project concludes or is terminated, while the SPV continues to exist for pending obligations and the transition period — a practical reality that was creating serious compliance uncertainty for India's infrastructure investment ecosystem.
🔴 Quick Summary — What You Need to Know
The Problem
When a PPP project concession concludes or is terminated, the SPV loses its infrastructure assets but still has pending tax, legal and contractual obligations — it can no longer qualify as an "SPV" under InvIT Regulations.
The Fix
SEBI adds a proviso to preserve SPV status to allow such entities to continue as SPVs for up to one year after all pending obligations conclude — giving InvITs time to exit or reinvest.
Who Is Affected
All InvITs holding road/PPP project SPVs nearing concession end-dates, their HoldCos, Investment Managers, investors, and Professionals / legal advisors to InvITs.
| Detail | Information |
|---|---|
| Circular Number | SEBI/HO/DDHS/DDHS-PoD-2/I/11698/2026 |
| Subject | Status of SPVs post conclusion or termination of Concession Agreement |
| Issued By | SEBI — Department of Debt and Hybrid Securities (DDHS) |
| Date of Issue | May 15, 2026 |
| Effective Date | Immediately — from date of issue |
| Regulation Amended | Regulation 2(1)(zy) — SEBI (Infrastructure Investment Trusts) Regulations, 2014, read with the new proviso relating to SPVs holding infrastructure projects under concession or similar agreements after concession conclusion/termination |
| Preceded by | SEBI Consultation Paper dated February 05, 2026 (comments closed February 26, 2026) |
| SEBI Source | sebi.gov.in — May 2026 Circulars |
🏛️ Section 1 — Understanding the Basics: InvIT, SPV, HoldCo & Concession Agreement
Before diving into the circular, it is essential to understand the building blocks involved. This is a layered structure — and each layer matters.
1A. What is an InvIT?
An Infrastructure Investment Trust (InvIT) is a SEBI-regulated investment vehicle — similar to a mutual fund — that pools capital from investors (unitholders) and channels it into income-generating infrastructure assets like highways, power transmission lines, gas pipelines, and telecom towers. As of 2025, India has 27 InvITs with aggregate AUM of approximately ₹7 lakh crore. InvITs must distribute at least 90% of their net distributable cash flows (NDCF) to unitholders.
1B. What is a HoldCo?
A Holding Company (HoldCo) is an intermediate company in which the InvIT holds controlling interest and ≥51% equity, and which in turn holds investments in one or more SPVs. Not all InvIT structures have a HoldCo — some InvITs invest directly into SPVs.
1C. What is an SPV? — The Legal Definition (Pre-Circular)
Under Regulation 2(1)(zy) of the SEBI (InvIT) Regulations, 2014, a Special Purpose Vehicle (SPV) is a company or LLP that satisfies all of the following:
| Condition | Requirement |
|---|---|
| Ownership | InvIT or HoldCo holds controlling interest and ≥51% equity (except in PPP projects where restricted by government/regulator) |
| Asset Composition | ≥90% of assets must be invested directly in infrastructure projects — not in other SPVs |
| Activity Restriction | Must be engaged only in activities pertaining to and incidental to the underlying infrastructure project |
1D. What is a Concession Agreement?
A Concession Agreement is a contract between a private entity (SPV) and a public authority (like NHAI, State Highway Authority, Power Ministry) under a Public-Private Partnership (PPP) model. Under this agreement, the private SPV is granted the right to build, operate, and collect revenue from a public infrastructure asset (e.g., a national highway) for a defined period — typically 25 to 30 years. At the end of this period, the asset is transferred back to the government.
✅ Conclusion of Concession
Normal, expected end of the concession period. The SPV's operating rights over the infrastructure asset expire as per the original contract schedule. The asset is handed back to the government in good condition.
Example: A 25-year NHAI toll road concession completing its term on the agreed date.
⚠️ Termination of Concession
Premature, unexpected end — triggered by breach, force majeure, material adverse event, or mutual agreement before the original end date. The asset reverts to the government earlier than planned — often with compensation disputes.
Example: A PPP highway project terminated by NHAI due to prolonged contractor dispute.
1E. Typical InvIT Investment Structure
NH-48 Toll Road Project
Power Transmission Line
⚠️ Section 2 — The Core Problem: What Happens When the Concession Ends?
This is where the structural problem begins. When a concession agreement expires or is terminated, the following sequence of events occurs — and each step creates a regulatory complication.
Infrastructure Asset Reverts to Government
On expiry/termination, the road, pipeline, or power line reverts to the public concessioning authority (NHAI, state government, etc.). The SPV's right to operate and earn toll/tariff revenue ceases immediately.
SPV Fails the 90% Infrastructure Asset Test
The SPV no longer holds ≥90% of its assets in infrastructure projects — because there are no infrastructure assets left. Under the existing definition of Regulation 2(1)(zy), it ceases to qualify as an "SPV" for purposes of InvIT Regulations.
Pending Obligations Prevent Immediate Winding Up
Despite losing the asset, the SPV still has outstanding obligations it must fulfil — often for years after concession end. These include income tax assessments, GST assessments, ongoing litigation defence, and the defect liability period (DLP) — a contractual obligation to fix defects in the asset for a defined post-handover period.
Negative Cash Flows — But No Revenue
The SPV is spending money (on legal fees, tax compliance, DLP obligations) but has zero income — the toll/tariff income stopped when the concession ended. These negative cash flows must be absorbed by the InvIT/HoldCo — and must be disclosed as adjustments in NDCF calculations at the Trust level.
Regulatory Vacuum — InvIT Cannot Hold a Non-SPV
InvIT Regulations only permit InvITs to invest in HoldCos and SPVs. If the entity no longer qualifies as an SPV (because it fails the 90% test), the InvIT's continued holding of that entity becomes a regulatory breach — even though it is commercially impossible to exit immediately. This was the central unresolved problem before this circular.
📌 What is the "Defect Liability Period" (DLP)?
The Defect Liability Period (DLP) is a post-handover contractual obligation under the concession agreement. After the infrastructure asset is handed back to the government at concession end, the SPV remains responsible for rectifying any defects in the structure for a defined period — often 1 to 5 years. During this period, the SPV must remain operational as a legal entity to honour these obligations, even though it earns no revenue and holds no assets. Winding up the SPV during the DLP would breach the concession agreement.
🤝 Section 3 — What Industry Asked For and How SEBI Responded
The Bharat InvITs Association (BIA) — the industry body representing InvITs — formally represented to SEBI that a regulatory clarification was urgently needed. The industry's ask was straightforward:
BIA's Representation to SEBI (Summarised)
Clarify that any entity under InvIT/HoldCo control which ceases to hold infrastructure projects upon expiry or termination of the concession agreement shall still be classified as an "SPV" under the InvIT Regulations — and such continued classification shall be construed accordingly under all regulations, notifications, and circulars issued thereunder. The HYSAC (Hybrid Securities Advisory Committee) endorsed this position and recommended action.
SEBI issued a consultation paper on February 05, 2026, invited public comments until February 26, 2026, and after deliberation issued this formal circular on May 15, 2026 implementing the solution.
✅ Section 4 — SEBI's Solution: The New Proviso to the SPV Definition
SEBI has addressed the problem by inserting a new proviso into the definition of "SPV" under Regulation 2(1)(zy) via an April 17, 2026 notification, while the May 15, 2026 circular lays down the conditions. The proviso reads:
New Proviso — Regulation 2(1)(zy)(ii)
"Provided that, in respect of an SPV holding an infrastructure project, the conclusion or termination of the concession agreement or such other agreement of a similar nature shall not affect its status as an SPV and such an SPV shall continue to be classified as an SPV subject to the fulfillment of such conditions as may be specified by the Board."
Note: The above proviso was inserted into Regulation 2(1)(zy)(ii) by a notification dated April 17, 2026; the May 15, 2026 circular prescribes the specific conditions under which this continued SPV classification will apply.
What This Proviso Means in Plain Language
❌ Without This Proviso (Earlier Position)
Once concession ends → SPV has no infrastructure asset → Fails 90% test → Loses SPV status → InvIT's holding becomes a regulatory violation → InvIT faces compliance breach despite commercial impossibility of immediate exit.
✅ With This Proviso (New Position)
Concession ends → SPV continues to be classified as SPV → InvIT's holding remains legally valid → InvIT gets time to settle obligations and then exit or reinvest → No compliance breach → Orderly wind-down possible.
📋 Section 5 — Conditions: What Must the Investment Manager Do?
The continued SPV classification is not unconditional. SEBI has prescribed two categories of mandatory conditions — an exit/reinvestment obligation and enhanced disclosure requirements.
Condition 1 — Exit or Reinvestment Within One Year
The Investment Manager must ensure that, within one year from the later of the specified trigger events, the InvIT/HoldCo either exits the investment or acquires a new infrastructure project in the same entity:
Option A — Exit
Divest the investment in the post-concession SPV by way of sale, liquidation, or winding-up of the entity.
Option B — Reinvestment
Acquire a new infrastructure project in the same entity — so it becomes an active SPV again, holding a new infrastructure project.
The one-year period starts from whichever of the following occurs LATER:
Completion or termination of the concession agreement
Conclusion of all pending claims and litigations involving the SPV
Completion of the Defect Liability Period under the relevant concession agreement
📌 Exam-critical: The clock starts from whichever of (a), (b), or (c) occurs last — not earliest. This is designed to give InvITs the maximum reasonable time to complete obligations before the exit deadline kicks in. An SPV with a pending tax tribunal case + incomplete DLP gets the one year only after both are resolved.
📌 Approval time excluded: The one-year period does not include the time taken to obtain statutory or regulatory approvals for exiting the SPV (sale, liquidation, winding-up or merger). In practice, this means the InvIT gets a full one-year window after such approvals are in place.
Important timeline exclusion
The one-year period does not include the time taken to obtain regulatory approvals for sale, merger, liquidation, or winding up.
Condition 2 — Enhanced Disclosures in Annual Report
Till the time the InvIT continues to hold the post-concession SPV, adequate disclosures must be made in the InvIT's Annual Report at two levels:
📊 InvIT Level Disclosures
- Detailed breakup of value of investments (gross basis) in post-concession SPVs
- Value of investments on net basis (after adjusting for liabilities/obligations)
- Expected timeline for exit or reinvestment
- Impact of SPV's negative cash flows on InvIT-level NDCF
📋 SPV Level Disclosures
- Brief project details, including the nature of the infrastructure project and date on which the concession/similar agreement ended
- Status of the vesting certificate or any other document issued by the concessioning authority upon successful handover
- Assets and liabilities of the SPV (including specific reserves, if any)
- Contingent liabilities, outstanding claims and material litigations relating to the SPV
- Debt profile and repayment schedule and whether the SPV’s assets are adequate to meet its liabilities and obligations
- Status of the Defect Liability Period (DLP) and other key contractual obligations, along with the estimated cost/liability associated with these obligations
Practical compliance impact
The circular gives InvITs a workable exit window, but it also places responsibility on the investment manager to track the latest trigger date, monitor pending obligations, and keep annual disclosures updated until the exit or reinvestment is completed.
In practice, this means the compliance file should separately track concession end date, litigation closure, tax closure, defect liability period, and approval timelines.
🔄 Section 6 — Decision Flowchart: Navigating SPV Status Post-Concession
SPV still qualifies normally
No issue — InvIT can continue holding
SPV fails 90% test → Would lose SPV status under old rules → Apply NEW PROVISO
InvIT may continue to hold it — No compliance breach
(a) Concession completion/termination | (b) All pending claims/litigations | (c) Defect Liability Period
Option A — EXIT
Sell / Liquidate / Wind up the SPV within 1 year of latest trigger date
Option B — REINVEST
Acquire new infrastructure project in the SPV within 1 year — SPV becomes active again
💡 Section 7 — Practical Examples
📘 Example 1 — Normal Conclusion of Concession (Road InvIT)
Facts
Highway InvIT holds SPV-A which operates a 200 km NHAI toll road under a 25-year concession. The concession expires on March 31, 2026. The road is handed back to NHAI. SPV-A has: (i) pending IT assessment for FY2023-24, (ii) 2-year defect liability period ending March 31, 2028, and (iii) an NHAI compensation claim pending in arbitration (expected resolution: 2027).
How the Circular Applies
Under the old rules, SPV-A would lose SPV status immediately from April 1, 2026 — a regulatory problem.
Under the new proviso: SPV-A continues to be classified as SPV. The latest trigger = arbitration conclusion (say, Dec 2027). InvIT has until December 2028 (1 year after arbitration ends) to exit or reinvest. DLP ending March 2028 is earlier, so arbitration conclusion (Dec 2027) is the latest trigger. During this period, Annual Report disclosures are mandatory.
📘 Example 2 — Premature Termination of Concession (Power InvIT)
Facts
Power InvIT holds SPV-B which operated a power transmission line under a 30-year PPP concession. The concession is terminated prematurely on June 1, 2026 due to a force majeure event. The SPV has: (i) pending GST audit for 3 years, (ii) compensation claim from the government still being negotiated, and (iii) no DLP (transmission lines have no typical DLP).
How the Circular Applies
Termination date = June 1, 2026. GST audit concludes = December 2027. Compensation claim = January 2028.
Latest trigger = January 2028 (compensation claim conclusion). InvIT has until January 2029 to exit SPV-B or bring a new project into it. SPV-B is disclosed in every Annual Report during this period with gross/net investment values and estimated liabilities.
📊 Section 8 — Before vs After: Complete Comparison
| Particular | 🔴 Before Circular | 🟢 After Circular (May 15, 2026) |
|---|---|---|
| SPV Status after concession concludes or is terminated | SPV ceases to qualify — fails 90% infrastructure asset test immediately on concession expiry | SPV continues to be classified as SPV under new proviso to Regulation 2(1)(zy) — status preserved |
| InvIT's right to continue holding | Continued holding becomes a regulatory breach — InvIT not permitted to hold non-SPV entities | Continued holding is fully permitted — legally valid under the new proviso, subject to conditions |
| Regulatory framework | No explicit provision — regulatory vacuum; InvIT left without guidance | Clear framework with proviso + conditions (exit/reinvestment timeline + disclosures) |
| Exit timeline | No structured timeline — immediate exit required in theory but commercially impossible | 1 year from whichever of concession end / pending claims / DLP completion occurs LAST |
| Reinvestment option | Not addressed — no mechanism to bring new project into a post-concession SPV | Explicitly permitted — InvIT can bring a new infrastructure project into the SPV within 1 year |
| Disclosure requirements | No specific disclosure framework for post-concession SPV status | Mandatory Annual Report disclosures at InvIT level (gross/net investment value) and SPV level (pending obligations, litigations, DLP status) |
| NDCF treatment | Unclear — negative cash flows of post-concession SPV had no clear treatment | Negative cash flows must be disclosed as adjustments in NDCF at Trust level in Annual Report |
| Applies to | N/A — no prior framework | All InvITs holding PPP project SPVs where concession has concluded or been terminated post-acquisition by the InvIT |
📊 Section 9 — Impact Analysis
✅ Benefits
- Eliminates regulatory no-man's-land for InvITs post-concession expiry
- Provides legal certainty — InvIT's continued holding is now explicitly valid
- Gives Investment Managers a realistic exit timeline (not forced fire-sale)
- Reinvestment option allows SPV recycling — efficient reuse of existing corporate structure
- Aligns Indian InvIT framework with global PPP lifecycle management best practices
- Reduces litigation risk between InvITs and SEBI arising from inadvertent regulatory breach
- Supports InvIT sector growth — road InvITs nearing first concession expirations get clarity
⚠️ Investor Considerations
- Post-concession SPVs are a drag on NDCF — negative cash flows reduce distributions to unitholders
- Investors must read Annual Report disclosures carefully to understand magnitude of post-concession SPV exposure
- Reinvestment option could change the risk profile of the InvIT — the new project may be different from the original
- Extended holding beyond 1-year limit (if any) would require further SEBI engagement — no automatic extension
🏗️ For Road Sector InvITs (Most Impacted)
- India's earliest PPP road concessions (post-2000) are approaching their 25-30 year end dates from 2025 onwards
- Road InvITs with multiple SPVs at different concession stages now have a lifecycle management framework
- DLP is particularly common in road sector — this circular directly addresses the DLP-period regulatory gap
- InvIT managers can now plan orderly asset rotation strategies rather than panic exits
⚖️ For Compliance Officers of InvITs
- Update compliance calendar to track all pending triggers (litigation, DLP, tax assessments) for every post-concession SPV
- Prepare board resolution templates for Investment Manager's decision on exit vs reinvestment
- Design Annual Report disclosure format covering gross/net investment value and SPV-level obligations
- Ensure NDCF computations at Trust level correctly reflect SPV-level negative cash flow adjustments
📅 Section 10 — Effective Date
Effective Immediately — May 15, 2026
This circular is effective from the date of its issue — May 15, 2026. There is no transition period. InvITs that currently hold any SPV whose concession has already concluded or been terminated can immediately rely on this circular to validate their continued holding — provided they comply with the exit/reinvestment timeline and disclosure conditions going forward.
Investment Managers should immediately assess their portfolio SPVs and identify any that are approaching or have already crossed concession conclusion/termination — and initiate the disclosure and timeline tracking process without delay.
📝 Conclusion
Bottom Line
SEBI's May 15, 2026 circular on SPV status post-concession is exactly the kind of practical, business-reality-driven regulation that mature infrastructure investment markets need.
🛡️
Legal certainty: Post-concession SPVs now have an explicit regulatory home — no more compliance vacuum
⏱️
Realistic timeline: 1-year exit window from the latest of concession end, litigation closure, or DLP completion
📢
Investor protection: Mandatory disclosures ensure unitholders know the exact exposure and timeline for every post-concession SPV
This circular is part of SEBI's broader Ease of Doing Business for InvITs initiative — alongside the May 2026 circular on fresh borrowings beyond 49% — signalling SEBI's commitment to building a mature, lifecycle-aware infrastructure investment framework in India.
❓ Frequently Asked Questions
Source: SEBI Circular No. SEBI/HO/DDHS/DDHS-PoD-2/I/11698/2026 dated May 15, 2026 — Status of SPVs post conclusion or termination of Concession Agreement. Available at sebi.gov.in. Background sourced from SEBI Consultation Paper on Measures towards Ease of Doing Business for REITs and InvITs, dated February 05, 2026. For more regulatory updates, visit corplawupdates.in.
This article is for informational purposes only and does not constitute legal advice.
