Infrastructure Investment Trust (InvITs full form), their units are listed on different trading platforms like stock exchanges and are a wholesome combination of both equity and debt instruments.
The primary objective of InvITs is to promote the infrastructure sector of India by encouraging more individuals to invest in it which can be modified according to a given situation.
Typically, such a tool is designed to pool money from several investors to be invested in income-generating assets. The cash flow thus generated is distributed among investors as dividend income. When compared to Real Estate Investment Trust or REITs, the structure and operation of both are quite similar.
Infrastructure Investment Trusts (InvIT)
- InvITs are instruments that work like mutual funds. They are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time. Part of this cash flow would be distributed as dividends back to investors.
- The minimum investment amount in an InvIT Initial Public Offering (IPO) is Rs 10 lakh, therefore, InvITs are suitable for high net-worth individuals, institutional and non-institutional investors.
- Similar to stocks, InvITs raise capital through IPOs and are then tradable on stock exchanges. Examples of listed InvITs include the IRB InvIT Fund and India Grid Trust.
- InvITs are regulated by the Securities and Exchange Board of India (SEBI) (Infrastructure Investment Trusts) Regulations, 2014.
Types of InvITs
Investment in Revenue-generating Finished Projects –
One of the types allows investment in revenue-generating finished projects and tends to invite investors through a public offering.
- Investment in Projects Under Construction –
Additionally, investors are also allowed to invest in projects that are under construction or have been finished. Notably, this type opts for a private placement of its units.
What is the Purpose of InvITs?
The purpose of InvITs is to enable Infrastructure Companies to repay their debt obligation quickly and effectively. Since infrastructure-oriented projects tend to take time to generate substantial cash flow, InvITs come in handy for paying off loan interests and other expenses conveniently.
Structure of InvITs in India
An InvIT is established as a trust and is registered with the SEBI. Typically, infrastructure investment trust SEBI comprises 4 elements, namely –
- Trustee: They are required to be registered with SEBI as debenture trustees. Also, they are required to invest at least 80% into infra assets that generate steady revenue.
- Sponsor: Typically, a body corporate, LLP, promoter or a company with a net worth of at least Rs. 100 crore classifies as a sponsor. Further, they must hold at least 15% of the total InvITs with a minimum lock-in period of 3 years or as notified by any regulatory requirement.
When it comes to a public-private partnership or PPP projects, sponsors serve as a Special Purpose Vehicle (SPV).
- Investment manager: As a body corporate of LLP, an investment manager supervises all the operational activities surrounding InvITs.
- Project manager: The authority is mostly responsible for executing projects. However, in the case of PPP projects, it serves as an entity that also supervises ancillary responsibilities.
The table below highlights the structure of infrastructure investment trust.
| Elements | Role |
| Trustee | Invest a minimum of 80% in infra assets. |
| Sponsor/s | Holds 15% of the total InvITs. |
| Investment manager | Manages investment and supervises operational activities concerning InvIT. |
| Project manager | Executes projects. |
Who Should Invest in InvITs?
InvITs are also listed on exchanges through IPO. However, the minimum amount required to invest in such an IPO is Rs. 10 lakh. Notably, small investors may struggle a little if they intend to invest directly in InvITs through IPO.
Regardless, high-net-worth institutions, individuals, etc., tend to find infrastructure investment trust a profitable investment option due to its capacity to invest and its return prospects.
Prospects of InvITs in India
It is anticipated that investment in InvITs in India has a promising future and may prove beneficial in the following ways.
- Existing projects would be provided with substantial refinancing options in the long run.
- It would help disengage developers’ capital to facilitate reinvestment towards new infrastructure projects.
- It is expected to facilitate the refinancing of current debt with cost-effective capital for the long term.
- It would encourage international investors to invest in the Indian infrastructure sector.
- Prospects of increasing opportunity to diversify an investment portfolio with the help of quality infrastructure assets remain.
FAQs
How to invest in InvIT?
One can invest in InvITs by buying and selling in a similar manner to equities. Note Public InvITs are listed on the NSE/BSE, and the units can be traded without lock-in.
An individual can open their respective brokerage account and start trading in InvITs that are publicly listed using the instrument symbol.
There is no minimum investment limit for InvITs.
What are the examples of InvITs?
Examples of InvITs include roads, railways, power generators, telecommunications, airports.