Introduction to
Infrastructure
Investment Trusts
(InvITs)
Disclaimer
Information contained in this presentation is as on September 30,
2021
The information contained in this presentation is only for
Educational and Awareness Purposes related to securities
market.
This presentation is only for Educational and Investor Awareness
Programs and shall not be used for any legal interpretations.
SEBI or Stock Exchanges or Depositories shall not be
responsible for any damage or loss to any one of any manner
from use of this material.
Suggestions or feedbacks, if any, may please be sent by mail to
visitsebi@[Link].
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Flow of Presentation
1. What are InvITs? - Overview;
2. Structure of InvITs;
3. Role of Constituents in InvITs;
4. Cash flow in InvITs;
5. Benefits of investing in InvITs;
6. Who can invest in InvITs;
7. How to own Units of InvITs;
8. Rights of unitholders in InvITs;
9. Taxation aspects of InvITs;
10. Points to ponder before investing in InvITs.
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What are InvITs? - Overview
InvITs stands for Infrastructure Investment Trusts.
InvITs are also like mutual funds that pool money from investors.
InvITs own and operate operational infrastructure assets like highways,
roads, pipelines, warehouses, power plants, etc. They offer regular
income (via dividends) and long-term capital appreciation.
InvITs allow pooling of money from multiple investors into a single trust
Trust which is professionally managed by an Investment Manager
Investment Manager invests in infrastructure assets or special
purpose vehicles (SPVs) holding such infrastructure assets.
There are listed InvITs, which are traded on the stock exchanges and
investors can buy and sell InvIT units just like trading of shares of any
listed company.
There are unlisted InvITs as well, in which large institutional investors can
participate.
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Structure of InvITs
Sponsor Investor
Sets up InvIT No lock-in – units freely
Lock-in restrictions tradeable from listing date
Trusteeship Fee Asset Management Fee
Trustee Investment Manager
InvIT
Holds InvIT’s assets for the
InvIT Manages and makes
investment decisions in
benefit of unit holders relation to underlying
100% assets
equity
O&M Contracts
SPV 1 SPV 2 SPV 3 Project Manager
Undertakeoperationsand
Assets Assets Assets management of InvIT assets
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SPV: Special Purpose Vehicles
Role of constituents in InvITs
• Sets up the InvIT
Sponsor • Transfers its shareholdings in SPV / assets to the InvIT
• Appoints the Trustee
• Holds the InvIT assets in trust for the benefit of the unit
holders
Trustee • Responsible for ensuring that the business activities and
investment policies comply with the provisions of the
regulations
• Sets the strategic direction of the InvIT and decides on the
acquisition, divestment or enhancement of assets
• Responsible for all activities related to issue and listing of units
Investment • Takes decisions on distribution to unitholders
Manager • Makes disclosures to various stakeholders as per
regulations
• Ensures redressal of investor grievances
Project • Responsible for day-to-day operations and maintenance
Manager of the assets
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Cash flow in InvITs : An illustration
Unitholder
Distributed to Unitholders
Unitholders make investment in to For tax treatment in the hands of
InvIT by subscribing to its units Unitholders,
distributions are divided into
– Dividend
– Interest
– Return of Capital
InvIT
Distribution in the form of :
InvIT invests into SPVs in the form Dividend
of Equity and debt Interest
Return of Capital
SPV 1 SPV 2 SPV 3
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Where can an InvIT invest its funds ?
At least 80% of the value of a public InvIT to be invested in ‘completed and
revenue - generating’ infrastructure projects.
A maximum of 20% of the total value of InvITs can be from:
Under construction infrastructure projects
Listed or unlisted debt of the companies in the infrastructure sector (other
than debt of Holding Company/SPV)
Equity of listed companies in India generating at least 80% of their income
from the infrastructure sector
Government securities, money market instruments, liquid mutual funds or
cash equivalents
Privately placed InvITs can have any mix of under construction and completed
infrastructure projects.
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-
Key Features of InvITs
Focus Asset Class:
Predominantly
completed Infra Assets
with >=80% of the
Key Unit Holders’ value of the InvIT from
Rights: Mandatory
revenue-generating
To vote on matters infrastructure projects Distribution:
related to a) material 90% of the net
acquisition/borrowing; distributable cash
b)appointment/change flow must be
of IM; c) induction/exit distributed to
of a Sponsor unitholders
InvITs Strong Corporate
Governance :
Leverage
Independent trustee
Management:
& valuers, >=50%
Net borrowing capped
independent
at 70% of AUM (if it is
Tax Efficiency: directors, additional
rated AAA)
Trusts have disclosure and rating
pass-through requirements
structures, i.e.,
they are not
taxed
Presence of Risk Controls and Regulatory Systems Leads to Strong Corporate Governance
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Benefits of investing in InvITs
InvIT
1 2 3 4 5 6
Provide Free Up Low-risk Facilitation of To Bring
Long-term Developer investments ownership of Higher
Capital for offered to Standards of
Financing diversified Growth
attract long- Governance
Option Reinvestment Infrastructure Potential
term into
for Existing into New investors Assets for
Infrastructure
Infrastructure Infrastructure such as for retail Investors
Development
Projects Projects insurance investors and
and pension
Management
funds
InvITs facilitate creation of infrastructure assets by providing better financing and ownership
opportunity while generating healthy returns for investors
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Who can Invest in InvITs?
Any investor (domestic / foreign / retail / institutional) can buy InvIT units
in India;
The minimum subscription amount for public InvITs is in the range of
₹10,000 to ₹ 15,000/- and the trading lot is 1 unit. (revised w.e.f. July 30,
2021) Previously it was ₹1 lakh & 100 units, respectively.
Investors can purchase InvIT units through a Demat account, similar to
how they would purchase equity shares;
InvITs are suitable for those who wants to take price benefits / returns
from Infrastructure projects, roadways.
InvITs are also suitable for those who wish to have infrastructure sector in
their investment portfolio
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How to own units of InvITs
Investors can own InvITs in following manner:
• By subscribing to issue in Initial Public Issue (IPO) or Follow-on
Issue of InvITs,
• By purchasing units of InvITs from Stock Exchange, where they are
listed,
Procedures for the bidding, application, payment, and Allotment of
InvITs Units in Public Issue (IPO or Follow-on Issue)
• Price of Units shall be determined through Book building process,
• Investors are required to participate in the Issue only through the
ASBA process
• An additional option to indivisual investors to apply in public issues of
units of InvITs through UPI (upto Rs. 5 Lac)
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How to own units of InvITs (…. contd.)
• Investors are required to pay the full Bid Amount or instruct the
bank to block the full Bid Amount at the time of Bidding,
• Investors should note that Allotment to successful Bidders will
be only in the dematerialized form,
• Mention correctly the details of the Bidders’ depository accounts
including DP ID, PAN and Client ID Bid cum Application Forms,
• Units of InvITs are listed on a stock exchange within 12 working
days from the close of issue.
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Rights of unitholders in InvITs
Right to receive returns through cash distributions made by the
trust
Right to vote on matters pertaining to acquisition of new assets or
borrowing
Right to vote on related party matters
Right to vote on matters such as appointment or change of the
Investment Manager
Right to vote on induction of a Sponsor, with the opportunity to exit
for dissenting voters
Right to vote on exit of Sponsor
Right to receive periodic disclosures like annual report, valuation
report, quarterly/ semi-annual financials, etc.
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Taxation aspects in InvITs
Nature of Distribution Tax Treatment in the hands of Investor #
Interest income Taxable
Dividends Exempted
(If the SPV has not opted for the lower tax
regime)
Taxable
(If the SPV has opted for the lower tax
regime)
Revenue from Taxable
underlying infrastructure
assets
# Investors need to check which type of income they receive and applicable tax treatment.
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Regulations to protect the interests of InvITs
unitholders
Securities SEBI (InvITs) Regulations, 2014
Exchange
SEBI (Listing Obligations and Disclosure Requirements)
Board of
India Regulations, 2015
(SEBI) SEBI (Prohibition of Insider Trading) Regulations, 2015
Reserve
Foreign Exchange Management (Non-debt Instruments
Bank of
India Rules), 2019
Indian Trusts Act, 1882
Others Companies Act, 2013
Competition Act, 2002
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Points to Ponder while investing in InvITs
Stability of income of Trust depends on the stability of
income earned from the assets of Trust,
Invest in InvITs which offer better transparency,
Investment in InvITs is to generate income and also to
earn capital gains
Due diligence to be made before taking investment
decisions
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5. Additional Information
For Further Information, you may visit following websites:
w w w. s e b i . g o v. i n /
[Link] n v e s t o r . s e b i . g o v . i n /
For Grievance Redressal, you may visit following website:
w w w. s c o r e s . g o v. i n /
Or, you may call SEBI at following Toll-free Helpline
Numbers from 9:00am to 6:00pm on all days (excluding declared
holidays in the state of Maharashtra):
1800 266 7575 Helpline is Available in 8 Languages:
English, Hindi, Bengali, Gujarati,
1800 22 7575 Marathi, Kannada, Telugu and Tamil
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THANK YOU
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