SEBI Cuts Off-Market OFS Cool-Off Period for Illiquid InvITs to 8 Weeks

A Shorter Trading Restriction Window for Private InvITs

SEBI’s change gives illiquid privately listed InvITs more flexibility around offer-for-sale transactions, while leaving their underlying liquidity constraints intact.

A targeted change to the OFS trading window

The Securities and Exchange Board of India has reduced the cooling-off period for offer-for-sale (OFS) transactions by privately placed, privately listed illiquid infrastructure investment trusts, or InvITs, from 12 weeks to eight. The revised period applies immediately, the regulator said in its circular.

The restriction concerns purchases or sales around an OFS. SEBI’s existing framework sets different periods according to liquidity: two weeks for the most liquid shares, four weeks for liquid shares and 12 weeks for illiquid shares. The new eight-week period is a specific adjustment for illiquid privately listed InvITs, rather than a general change to the framework for all securities.

Why private InvIT units are treated differently

SEBI’s rationale reflects the trading characteristics of these instruments. Privately listed InvITs can have high trading lot sizes, which may limit participation largely to institutional investors, corporates and high-net-worth individuals. With fewer potential participants, trading volumes can remain thin, pushing the units into the illiquid category.

That distinction matters because the cooling-off period had been linked to liquidity. A 12-week restriction applied even where low turnover stemmed from the structure of the units and the limited pool of eligible participants. SEBI said it had received market feedback and was acting to facilitate ease of doing business. The shorter period therefore addresses a constraint associated with the trading structure, not a change to the InvIT’s underlying assets or operating performance.

More flexibility does not guarantee deeper trading

Reducing the window by four weeks gives relevant market participants a shorter period in which purchases or sales around an OFS are restricted. That may make it easier to plan transactions and could improve flexibility for parties involved in an offer. The change should be viewed as a procedural easing, however, rather than evidence that trading in private InvIT units will become more active.

High lot sizes and thin volumes remain the structural features identified by SEBI. A shorter restriction cannot by itself ensure that buyers and sellers will be available when a transaction is proposed, nor does it establish that an OFS will attract stronger demand. Investors should distinguish between regulatory flexibility and market liquidity: the former has changed, while the circular does not indicate that the latter has improved.

What investors should monitor

For investors assessing privately listed InvITs, the circular changes one part of the transaction timetable, not the investment case. Liquidity remains relevant when considering the ability to enter or exit a position, particularly where trading volumes are thin. The shorter cooling-off period may support greater transaction flexibility, but it does not remove the possibility that a trade could be difficult to execute.

The immediate implementation means the revised eight-week period is now in force for the specified category. Market participants will need to apply the change to eligible OFS-related transactions while continuing to account for the distinct liquidity profile of privately listed InvIT units.

Key Highlights

• SEBI cut the cooling-off period for OFS transactions by illiquid, privately listed InvITs to eight weeks from 12 weeks.
• The change took effect immediately.
• The broader framework retains different periods for securities based on liquidity, including two weeks for the most liquid and four weeks for liquid shares.
• SEBI linked private InvIT illiquidity to high trading lot sizes and limited participation.
• The shorter window eases a transaction restriction but does not guarantee higher trading volumes or easier exits.

Investor Note: Treat the SEBI change as a targeted easing of OFS-related restrictions, not as a signal that liquidity risks in privately listed InvITs have disappeared. Trading activity and the practical ability to exit remain important considerations.