Infrastructure Investment Trust (InvITs)

#GS3 #Infra&Development #Economy

 

While the Union Cabinet chaired by the Prime Minister had approved the National Highways Authority of India (NHAI) setting up Infrastructure Investment Trust(s) (InvIT) in December 2019, the company has recently started meeting investor groups, as it prepares to come up with its InvIT issue.

  • The issue will enable NHAI to monetize its completed National Highways that have a toll collection track record of at least one year. 
  • The NHAI reserves the right to levy toll on identified highways and it will help the company raise funds for more road development across the country.

 

About Infrastructure Investment Trusts (InvITs)

  • Infrastructure and real estate are the two most critical sectors in any developing economy. A well-developed infrastructural set-up propels the overall development of a country. It also facilitates a steady inflow of private and foreign investments, and thereby augments the capital base available for the growth of key sectors in an economy, as well as its own growth, in a sustained manner.
  • Given the importance of these two sectors in the country, and the paucity of public funds available to stimulate their growth, it is imperative that additional channels of financing are put in place.
  • An Infrastructure Investment Trust (InvITs) is Collective Investment Scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return. 
  • The InvIT is designed as a tiered structure with Sponsor setting up the InvIT which in turn invests into the eligible infrastructure projects either directly or via special purpose vehicles (SPVs).
  • The InvITs are regulated by the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
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