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CS Professional · Strategic Management and Corporate Finance · Infrastructure Investment Trusts

Sagar Highways InvIT acquires a toll road through an SPV. Which holding pattern satisfies the requirement on its interest in the SPV?

The InvIT must hold at least 51% of the SPV's equity share capital or interest and have control over it. Minority stakes, veto rights, a 50% joint holding or a sponsor casting vote do not meet the requirement, whatever the SPV's revenue status.

  1. AHolding 26% of the SPV's equity with a shareholder agreement giving veto rights
  2. BHolding at least 51% of the SPV's equity share capital or interest, giving it controlCorrect
  3. CHolding 50% jointly with the sponsor, with the sponsor having the casting vote
  4. DHolding any minority stake, provided the SPV is revenue-generating

Explanation

When an InvIT holds assets through an SPV, it must have controlling interest and hold at least 51% of the SPV's equity share capital or interest. A 26% or 50% stake falls short, and a casting vote for the sponsor defeats control. Revenue-generating status does not replace the 51% condition.

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