Net Distributable Cash Flow is the statutory cash flow metric that defines the minimum liquidity an InvIT and its SPVs must distribute to unitholders, with at least 90% mandated to be paid out under SEBI regulations.
A specific financial calculation established under SEBI circulars and InvIT offer documents, derived by adjusting cash profit for non-cash items, statutory reserves, debt obligations, and capital maintenance requirements.
NDCF is the money that is truly free to be put into investors' pockets. It is what remains after the highway or power plant pays its operating bills, services its bank loans, and sets aside money for resurfacing roads or maintaining equipment.
A business generates ₹500 Cr of EBITDA. But after paying ₹180 Cr of bank interest and principal, ₹40 Cr for road resurfacing reserves, and ₹30 Cr of corporate taxes, exactly ₹250 Cr remains. That ₹250 Cr is the NDCF, and 90% of it must be wired to unitholders.
If annual NDCF is ₹250 Cr across 25 Cr issued units, the NDCF per unit is ₹10. At a 90% payout ratio, distribution is ₹9.00 per unit per year, providing a transparent 9.0% distribution yield on a ₹100 unit price.
SEBI requires NDCF to be computed at both the SPV level and the Trust level. If cash is trapped in an SPV due to bank covenants, Trust-level NDCF suffers even if aggregate earnings are high.
Establish clear, standardized NDCF computation policies across all SPVs to avoid unexpected distribution fluctuations that alarm institutional unitholders.