An Infrastructure Investment Trust (InvIT) is a collective investment vehicle, similar to a mutual fund, that allows individual and institutional investors to invest directly in income-generating infrastructure projects.
Simple Analogy: An InvIT is like a mutual fund for infrastructure. Instead of stocks or real estate, the fund manager of an InvIT buys and manages a portfolio of large-scale infrastructure assets like highways, power transmission lines, and pipelines. You can buy units of this trust on the stock exchange, just like a share.
How InvITs Work
- Creation: An infrastructure developer (the sponsor) bundles its completed and operational infrastructure assets into a trust.
- IPO: The trust launches an Initial Public Offering (IPO) to raise money from investors.
- Listing: The units of the InvIT are then listed on a stock exchange, making them tradable.
- Income Generation: The InvIT earns income from the revenue generated by its underlying assets, such as tolls collected from a highway or fees from a power transmission line.
- Distribution: A large portion of this income is then distributed to the unitholders in the form of dividends.
Key Features of InvITs in India
- Income Distribution: As per SEBI regulations, InvITs must distribute at least 90% of their Net Distributable Cash Flow to their unitholders.
- Investment in Completed Projects: A significant portion of the assets (at least 80%) must be in completed and revenue-generating projects to ensure stable cash flows.
- Asset Focus: The underlying assets must be infrastructure projects, such as roads, bridges, power projects, telecom towers, and pipelines.
- Tradability: InvIT units are traded on stock exchanges, providing liquidity to investors.
- Regulator: InvITs in India are regulated by the Securities and Exchange Board of India (SEBI).
InvITs vs. REITs: A Quick Comparison
While the structure is similar, the key difference lies in the underlying assets.
| Feature | Infrastructure Investment Trust (InvIT) | Real Estate Investment Trust (REIT) |
| Underlying Assets | Infrastructure projects (Highways, Power Lines, etc.) | Commercial Real Estate (Office Parks, Malls, etc.) |
| Source of Income | Tolls, Transmission fees, etc. | Rental income from tenants. |
Export to Sheets
Both InvITs and REITs are innovative investment products designed to provide small investors with access to large-scale, income-generating assets that were previously accessible only to large institutions.