Definition
Sponsor (InvIT/REIT)
The sponsor is the entity that sets up a REIT or InvIT, contributes the initial assets and must retain a minimum unitholding for a lock-in period.
Under SEBI regulations, the sponsor establishes the trust and transfers its assets into it, then continues to hold a minimum percentage of units (with a lock-in) to keep skin in the game. The sponsor appoints the manager and the trustee that run the vehicle.
The sponsor's continued holding aligns its interests with public unitholders and is meant to ensure ongoing commitment to the assets. Sponsor lock-in requirements are similar in spirit to promoter lock-ins in ordinary IPOs.
Related terms
- Promoter Lock-inPromoter lock-in is the period after an IPO during which promoters cannot sell their shares, ensuring they retain skin in the game.
- REIT IPOA REIT IPO is the public listing of a Real Estate Investment Trust, which pools investor money to own income-generating commercial property.
- InvIT IPOAn InvIT IPO is the public listing of an Infrastructure Investment Trust, which pools capital to own operating infrastructure assets like roads and power lines.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.