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InvITs- A New Investment

Gateway for Infrastructure
Growth in India

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Introduction
1.Large scale, efficient Infrastructure is the basic requirement
for any economy to function competitively. This is also essential
to maintain and updated these infra for continuous growth and
smooth running of economy.
With the vision of Make in India, our Prime Minister has given
much emphasis on infrastructure growth and taking various
steps to revive the sector. Several infrastructure projects which
are under development in India are on hold or delayed due to
various reasons. These infra systems are high-cost investments.
The infrastructure projects comprising roads and highways,
ports, power, Communication and water sanitation projects etc.
have been facing severe liquidity crunch due to the limited
funding options, high interest cost and lack of investor interest.
Witnessing the requirement for infrastructure in a country like
India coupled with the huge funding requirements of the
infrastructure developers, the structure of InvIT seems to be a
much needed and a welcome introduction.
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What was the Necessity of InvITs?
2.Infrastructure projects require huge capital with long term involvement. Any delay or failure
in project may sink entire fund therefore investor refrain from this sector moreover small
investor cannot participate with the vision of earning on investment. The major reason for
envision of InvITs are as follows:
2.1 Providing wider and long-term re-finance for existing infrastructure projects.
2.2 Unlocking of tied up capital
2.3 Attracting foreign funding
2.5 Diversity of portfolio
What is InvITs?
3.1Infrastructure Investment trust (InvITs) are another form of mutual fund which enable small
investor to invest in infrastructure sector. As the name implies, infrastructure investment trust
invest pooled money of investor in the sector and give return in the form of dividend to their unit
holders.
InvITs can participate in investment directly or thru SPVs but in case of PPP model investment
can be made
via SPVs.
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InvITs are regulated by SEBI (Infrastructure Investment Trusts) Regulation, 2014. Projects which
will qualify in the definition of Infrastructure have been cited in notification dated 07.10.2013
issued by Ministry of Finance).
Types of InvITs
4.1 InvITs have been allowed to invest in two categories:
a. Investment in completed and projects having revenue
b. Investment in projects which are under construction
Registration and Structure of InvITs
5.1 As per InvITs regulation, InvIT shall obtain a registration from SEBI in a manner as
prescribed. A trust will be formed and registered for InvIT operation. An application for grant of
certificate of registration as InvIT shall be made by the sponsor in Form A as specified in the
Schedule I and shall be accompanied by a non-refundable application fee as specified in
Schedule II..The trust deed must have main objective of under taking InvIT in accordance with
the InvIT regulation.

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Functionaries of InvIT
6.1An InvIT has 4 parties such as Sponsor(s), Trustee, Investment Manager and Project
Manager.
Sponsor:Sponsor means any company or LLP or body corporate which sets up the InvIT and is
designated as such at the time of application made to the Board and in case of PPP projects,
shall mean the infrastructure developer or a special purpose vehicle holding concession
agreement.
InvIT shall have maximum 3 sponsors. Minimum 100 croresnet worth require for eligibility of
sponsor. Sponsor(s), collectively, have to hold atleast 25% in the InvIT for atleast 3 years from
the date of listing,
Trustee :The Trustee shall be registered with SEBI under the SEBI (Debenture Trustees)
Regulations, 1993. Trustee should not be associated with Sponsor's .The trustee will play role of
supervisor and look after activities of Investment manager. Trustee ensure that investment
manager makes timely payment of dividend to unit holders
Investment Manager:Investment Managers manage assets and investments of the InvIT and
undertakes activities of the InvIT. Networth of minimum 10 crores & 5 years of experience in
fund management/advisory services, development in infrastructure sectorrequire for eligibility of
Investment
manager.
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