What is Infrastructure investment trust (INVIT)?
It’s a
collective investment scheme somewhat like a mutual fund registered with a
market regulator (like SEBI in India). It collects money from
individual/institutional investors in exchange for its units and uses that
money to invest in infrastructure to earn income in return.
INVIT has
the features of both debt and equity. Like debt it offers low risk and stable
cash flows and like equity it provides income in the nature of capital gains
via change in the unit price.
INVITS
must invest at least 80% of their funds in completed and revenue generating
projects. Doing so, mitigates the under-construction risks of infrastructure
sector.
The
concept of INVIT ensures steady predictable cash flows to the investors because
INVITs have to distribute 90% of their net distributable cash flows to the
investors.
The motto
of INVIT is to enable investors to invest in the infrastructure sector.
There are
listed as well as unlisted INVITs.
Structure of INVIT
As per SEBI guidelines, sponsor of infrastructure assets is
required to form a trustee. Sponsors, investment manager, and a project manager
are important parties for running an INVIT. There are two types of INVIT:
1.
INVITs that are authorised to invest in
constructed and revenue generating infrastructure projects in the first place.
2.
INVITs that are allowed to invest in
infrastructure projects that are either completed or ongoing.
In the first case, INVITs must be listed via a public issue
and, in second case, it must choose private placement of units. However, in any
case it is needed for both of them to be listed.
·
Sponsor: The term sponsor refers to any
LLP, Company or body corporate which sets up the INVIT. In case of PPP projects,
shall mean the infrastructure developer or a special purpose vehicle holding
concession agreement.
·
Trustee: Person who holds the assets of
INVIT on behalf of the unit holders.
·
Investment manager: LLP or company or
body corporate which manages assets of the INVIT and undertakes activities of
the INVIT.
·
Project manager: Person appointed by
INVIT for achieving execution/management of the project and in case of PPP projects,
the entity responsible for such execution and achievement of project milestones
as per the concession agreement or any other related project document.
SEBI regulations mandate that not less than 90% of the net
distributable cash flows of the INVIT shall be distributed to its unit holders.
An INVIT must invest not less than 80% of the value of its
assets in eligible infrastructure projects.
INVITs in India (source)
1.
Anzen India Energy Yield Plus Trust
2.
Bharat Highways InvIT
3.
Cube Highways Trust
4.
Data Infrastructure Trust
5.
Digital Fibre Infrastructure Trust
6.
HIGHWAYS INFRASTRUCTURE TRUST
7.
India Grid Trust
8.
India Infrastructure Trust
9.
Indian Highway Concessions Trust
10.
IndInfravit Trust
11.
IRB INFRASTRUCTURE DEVELOPERS LIMITED
12.
IRB InvIT Fund
13.
National Highways Infra Trust
14.
Oriental InfraTrust
15.
POWERGRID Infrastructure Investment Trust
16.
Roadstar Infra Investment Trust
17.
SchoolHouse InvIT
18.
Shrem Invit
19.
Virescent Renewable Energy Trust
Benefits of Investing in INVIT
1.
Long term finance option for Existing
Infrastructure Projects
2.
Frees up Developer’s capital for reinvestment
into new infrastructure projects
3.
Low-risk investments offered to attract long-term
investors like pension funds and insurance companies.
4.
Facilitates ownership of diversified
infrastructure assets for retail investors
5.
Offers higher standards of governance into
infrastructure development and management
6.
Growth prospective for investors
Who can invest in INVITs?
Any investor can purchase units of INVIT in India. The minimum
subscription amount for public INVITs is in the range of Rs. 10,000 to Rs. 15,000.
Units can be purchased through DEMAT account.
? In depth understanding){kind=link}