Infrastructure Investment Trusts (InvITs)
Why in news?
Recently, the National Highways Infra Trust (NHIT) raised ₹18,380 crore in its 4th round of fundraising.
- NHIT was set up by the National Highways Authority of India (NHAI) to align with India’s National Monetization Pipeline (NMP) to unlock the value of government-owned infrastructure assets.
Relevance:
GS-02 (Government policies and interventions)
About Infrastructure Investment Trusts (InvITs):
- Definition: InvIT is an investment vehicle similar to mutual funds or Real Estate Investment Trusts (REITs), allowing direct investment from individual and institutional investors in infrastructure projects.
- Functioning of InvITs:
- InvITs collects funds from investors in infrastructure assets.
- Investments can be made directly or through Special Purpose Vehicles (SPVs)/Holding Companies.
- Income is earned from sources like tolls, rents, interest, or dividends from the infrastructure projects.
- The interest, dividend, and rental income are taxable in the hands of unitholders.
- Regulation and Compliance:
- SEBI (Infrastructure Investment Trusts) Regulations, 2014 govern InvITs in India.
- SEBI mandates InvITs to distribute at least 90% of their income to investors.
- InvITs are recognized as borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
- Types of InvITs:
- Public InvITs
- Private Listed InvITs
- Private Unlisted InvITs
- Advantages of InvITs:
- Offers retail investors access to large infrastructure projects with low investment amounts.
- Provides liquidity as units are listed on stock exchanges.
- Helps attract long-term investments in infrastructure by ensuring stable returns.
Significance of NHIT’s Fundraising:
- Supports India’s Monetization Programme by attracting private investment into the highway sector.
- Enhances infrastructure financing by providing a reliable investment avenue for retail and institutional investors.
- Reduces the financial burden on the government for infrastructure development.
- Boosts investor confidence in public-private partnerships for infrastructure growth.
Prelims Question:
With reference to Infrastructure Investment Trusts (InvITs) in India, consider the following statements:
- It is regulated by the Securities and Exchange Board of India (SEBI).
- InvITs are required to distribute at least 75% of their income to investors.
- InvITs can invest directly or through Special Purpose Vehicles (SPVs).
Which of the statements given above is/are correct?
A) 1 and 2 only
B) 2 and 3 only
C) 1 and 3 only
D) 1, 2, and 3
Answer: C) 1 and 3 only
Explanation:
- Statement 1 is correct: InvITs are regulated by SEBI under the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
- Statement 2 is incorrect: InvITs are required to distribute at least 90% of their income to investors, not 75%.
- Statement 3 is correct: InvITs can invest directly or through SPVs.
