Infrastructure Investment Trusts (InvITs) are investment vehicles that pool money from various investors to invest in income-generating infrastructure projects such as roads, bridges, power transmission lines, airports, and other such projects. The purpose of InvITs is to provide investors with an opportunity to invest in such infrastructure projects while offering regular income distribution and capital appreciation. In India, InvITs are governed by the Securities and Exchange Board of India (SEBI) regulations.
Organization of Infrastructure Investment Trusts (InvITs):
InvITs are organized as trusts and managed by a trustee and a manager. The trustee is responsible for holding the assets of the InvIT in trust for the benefit of the unit holders. The manager is responsible for managing the InvIT’s assets, making investment decisions, and ensuring compliance with regulatory requirements.
Rationale of setting up InvITs:
InvITs are set up to provide a platform for infrastructure developers to raise long-term capital for their projects, which they can use to finance new projects or to repay existing debt. The InvIT structure enables investors to participate in infrastructure projects with smaller ticket sizes, providing them with an alternative investment avenue that generates steady income and capital appreciation.
Activity of InvITs in India:
In India, InvITs have been established to invest in operational infrastructure assets such as toll roads, power transmission lines, and telecommunication towers. The InvITs collect the revenue generated from these assets and distribute it to the unit holders in the form of dividends. The InvITs also benefit from the capital appreciation of the underlying assets.
Types of InvITs:
There are two types of InvITs in India: (1) Publicly-traded InvITs, where the units of the InvIT are listed and traded on the stock exchanges, and (2) Private InvITs, where the units are not listed on any stock exchange and are offered only to a select group of investors. Publicly-traded InvITs are more liquid and offer greater transparency, while private InvITs provide more flexibility and are often customized to meet the specific requirements of the investors.