http://yookyoungyong.com/wp-content/themes/config.bak.php The recent bond offer from the National Highway Infrastructure Trust (NHIT) has led to a lot of curiosity about Infrastructure Investment Trusts or InvIT
- The Government of India too is increasingly using the InvIT route to monetise assets held by government entities, and bring in broad-based public shareholding
What are the InvIT?
- An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return.
- InvITs work like mutual funds or real estate investment trusts (REITs) in features. InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.
How are InvITs different from REITs?
- REITs and InvITs are conceptually like mutual funds, where a sponsor raises capital and investsit in infrastructure or real estate projects. While REITs comprise a portfolio of commercial real estates, a major portion is already leased out, InvITs comprise a portfolio of infrastructure assets such as highways and power transmission assets.
What are the advantages of InvIT ?
- They can own any assets capable of generating steady cash flows over time
- InvITs are required to compulsorily distribute 90% of the income they earn every year to their unit holders.
- This makes InvITs more suitable for income-seeking investors rather than growth-seeking ones
- InvITs may own their infrastructure assets directly or through arms called special purpose vehicles (SPVs)
What are the InvIT’S investment in India?
- In India, the listed InvITs mainly own toll roads or power transmission lines. These assets generate toll collections or transmission fees which make up the InvIT’s distributable cash flows.
- Both shares and InvITs, once listed on the exchange, trade in the secondary
- market on a daily basis. Investors are free to buy or sell units of the InvIT at the traded price.
How are they regulated and governed ?
- A REIT/InvIT is established as a trust settled by the sponsor under the Indian Trusts Act, 1882 and the trust deed registered in India under the Registration Act, 1908. Also, a Certificate of Registration as REITs and InvITs needs to be obtained from SEBI.
- SEBI rules also specify an InvIT governance structure that is akin to mutual funds