A Related Party Transaction (RPT) in an InvIT is any contract, asset transfer, or service arrangement between the trust/SPVs and the Sponsor, Investment Manager, Trustee, or their associates, strictly regulated to prevent value leakage.
Transactions involving transfer of resources, services, or obligations between the InvIT (including HoldCo/SPVs) and related parties as defined under SEBI InvIT regulations and Companies Act, 2013.
When the sponsor sells another road to the InvIT, or when the sponsor's construction company gets hired to maintain the highway, that is a Related Party Transaction. Because the sponsor is on both sides of the table, SEBI enforces strict rules so unitholders are not shortchanged.
The sponsor offers to sell a new solar plant to the InvIT for ₹500 Cr. Two independent valuers evaluate the asset. The Audit Committee reviews the fairness opinion. At the unitholder meeting, the sponsor cannot vote; only independent institutional and public unitholders vote on the deal.
Transactions exceeding specific statutory thresholds (e.g., 5% of asset value) require prior unitholder approval where the related party cannot vote. Fairness opinions and two independent valuation reports are mandatory.
RPT governance is the primary litmus test for institutional investors. Transparent, fair related-party dealings earn valuation premiums; suspicious management fees or asset dumping destroy credibility.
Establish written, board-approved related-party policies and benchmark all project management contracts to competitive market tenders.