Infrastructure Investment Trusts (InvITs) have emerged as an attractive investment avenue in the infrastructure sector

Infrastructure Investment Trusts (InvITs) has emerged as an attractive investment avenue in the infrastructure sector, offering investors a new way to participate in the growth potential of infrastructure projects without the complexities of direct ownership or market risk associated with equity investments.

These trusts are designed to provide a platform for infrastructure developers to raise funds and reduce their debt burden while offering investors the opportunity to benefit from the steady income generated by the underlying infrastructure assets.

InvITs operate similarly to mutual funds, where multiple investors pool their investments. However, the key difference lies in the underlying assets; instead of investing in equities, debt, or gold, InvITs hold infrastructure projects.

The Trust is structured with a three-tiered management team consisting of the sponsor, trustee, and manager, ensuring professional oversight and efficient operations.

To form an InvIT, an infrastructure development company takes on the role of the sponsor and appoints a trustee to manage the assets. The sponsor relinquishes control over the assets, which are now owned by the Trust.

The Trustee then appoints two managers, an investment manager, and a project manager. The investment manager focuses on optimizing returns from existing investments and making decisions for further asset growth, while the project manager oversees the operation of infrastructure assets.

InvITs can be categorized based on the type of infrastructure they own or operate, including energy, transport & logistics, communications, social and commercial infrastructure, and water and sanitation. They can also be classified as publicly listed or privately held, with publicly-listed InvITs being tradable on stock exchanges.

In India, the introduction of InvITs by SEBI has provided a new funding avenue for infrastructure development, and the success of several publicly-listed InvITs highlights their increasing popularity among investors.

With SEBI regulations mandating that InvITs must invest at least 80% of their assets in completed projects capable of generating income, investors can expect a reliable income stream from these instruments.

For infrastructure companies, InvITs offer a means to raise capital without incurring further debt and enjoy tax benefits, ultimately supporting their growth and expansion plans. Moreover, InvITs provide a route for the general public to participate in infrastructure development and contribute to the country's progress.

In conclusion,

Infrastructure Investment Trusts (InvITs) have emerged as a game-changer in the infrastructure sector, offering a win-win situation for both infrastructure developers and investors. As the demand for infrastructure investment grows in a developing economy like India, InvITs are poised to play an increasingly crucial role in facilitating sustainable infrastructure development and providing attractive investment opportunities. However, potential investors should carefully assess the risk-return profile and their investment objectives before venturing into this market.