InvITs are infrastructure developer-sponsored Trusts that own, operate, and invest in completed as well as under-construction infrastructure projects which entitle the unit holder(s) to receive a share of the income generated by the InvIT from its infrastructure assets. These infrastructure assets can be roads and highways, power distribution networks, telecom towers, fiber optic networks, etc.
Let's say we have an infra company that specializes in constructing roads and highways on a Build-Operate-Transfer (BOT) basis, which means company will build roads**,** operate it for a period of time (collect toll as income) & on completion of tenure, will transfer it to the government. Now if company needs funds for more construction, it will have to raise either by selling shares (equity), taking a loan (debt) or issue fixed income instruments (debentures) or, it can opt for an InvIT.
Structure of InVITs
- Sponsor - sets up InvIT and appoints a trustee & holds >15% of the total units in InvIT (3 yrs lock-in)
- Trustees - hold assets on behalf of and for the benefit of investors
- Investment Manager - undertakes operational responsibility of InvIT
- Project Manager - executes & operates projects
- SPVs - hold assets or projects
Type of InvITs
- Publicly offered listed InvITs - Units offered to public (min 20 investors) & Minimum investment and trading lot - Can be bought as low as 1 unit.
- Privately placed listed InvITs - Only to institutional investors (min 5, max 1000 investors) & Minimum investment (Rs. 1 crore/ 25 crore) and trading lot (Rs. 1 crore/ 2 crore)
- Privately placed unlisted InvITs - Only to institutional investors (max 1000 investors) - Minimum investment (Rs. 1 crore)
Eligibility of Public InvITs in India
- At least 80% of the value of the InvIT to be completed and income-generating assets
- Maximum 20% of the value of the InvIT Assets shall be invested in other eligible investments including,
investments in under-construction projects, which shall not exceed 10% of the value of InvIT Assets
- Minimum size of offer : 250 crores