InvITs- A New Investment Gateway for Infrastructure Growth in India

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Customer Care No. 91-11-45562222
InvITs- A New Investment Gateway for
Infrastructure Growth in India
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• Introduction
• 1. Large scale, efficient Infrastructure is the
  basic requirement for any economy to function
  competitively. This is also essential to maintain
  and updated these infra for continuous growth and
  smooth running of economy.
• With the vision of Make in India, our Prime
  Minister has given much emphasis on
  infrastructure growth and taking various steps to
  revive the sector. Several infrastructure
  projects which are under development in India are
  on hold or delayed due to various reasons. These
  infra systems are high-cost investments.
• The infrastructure projects comprising roads and
  highways, ports, power, Communication and water
  sanitation projects etc. have been facing severe
  liquidity crunch due to the limited funding
  options, high interest cost and lack of investor
  interest. Witnessing the requirement for
  infrastructure in a country like India coupled
  with the huge funding requirements of the
  infrastructure developers, the structure of InvIT
  seems to be a much needed and a welcome
  introduction.
• Finance Minister Mr. Arun Jaitely announces
  exemption from dividend distribution tax(DDT) by
  a domestic company to business trust(InvITs) in
  his speech in Budget 2016 . This announcement has
  suddenly given momentum to attract investor in
  Infra companies.

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• What was the Necessity of InvITs?
• 2. Infrastructure projects require huge capital
  with long term involvement. Any delay or failure
  in project may sink entire fund therefore
  investor refrain from this sector moreover small
  investor cannot participate with the vision of
  earning on investment. The major reason for
  envision of InvITs are as follows
• 2.1 Providing wider and long-term re-finance for
  existing infrastructure projects.
• 2.2 Unlocking of tied up capital
• 2.3 Attracting foreign funding
• 2.5 Diversity of portfolio
• What is InvITs?
• 3.1 Infrastructure Investment trust (InvITs) are
  another form of mutual fund which enable small
  investor to invest in infrastructure sector. As
  the name implies, infrastructure investment trust
  invest pooled money of investor in the sector and
  give return in the form of dividend to their unit
  holders.
• InvITs can participate in investment directly or
  thru SPVs but in case of PPP model investment can
  be made only via SPVs.

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• InvITs are regulated by SEBI (Infrastructure
  Investment Trusts) Regulation, 2014. Projects
  which will qualify in the definition of
  Infrastructure have been cited in notification
  dated 07.10.2013 issued by Ministry of Finance).
• Types of InvITs
• 4.1 InvITs have been allowed to invest in two
  categories
• a. Investment in completed and projects having
  revenue
• b. Investment in projects which are under
  construction
• Registration and Structure of InvITs
• 5.1 As per InvITs regulation, InvIT shall obtain
  a registration from SEBI in a manner as
  prescribed. A trust will be formed and registered
  for InvIT operation. An application for grant of
  certificate of registration as InvIT shall be
  made by the sponsor in Form A as specified in the
  Schedule I and shall be accompanied by a
  non-refundable application fee as specified in
  Schedule II..The trust deed must have main
  objective of under taking InvIT in accordance
  with the InvIT regulation.

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• Functionaries of InvIT
• 6.1 An InvIT has 4 parties such as Sponsor(s),
  Trustee, Investment Manager and Project Manager.
• Sponsor Sponsor means any company or LLP or body
  corporate which sets up the InvIT and is
  designated as such at the time of application
  made to the Board and in case of PPP projects,
  shall mean the infrastructure developer or a
  special purpose vehicle holding concession
  agreement.
• InvIT shall have maximum 3 sponsors. Minimum 100
  croresnet worth require for eligibility of
  sponsor. Sponsor(s), collectively, have to hold
  atleast 25 in the InvIT for atleast 3 years from
  the date of listing,
• Trustee  The Trustee shall be registered with
  SEBI under the SEBI (Debenture Trustees)
  Regulations, 1993. Trustee should not be
  associated with Sponsor's .The trustee will play
  role of supervisor and look after activities of
  Investment manager. Trustee ensure that
  investment manager makes timely payment of
  dividend to unit holders
• Investment Manager Investment Managers manage
  assets and investments of the InvIT and
  undertakes activities of the InvIT. Networth of
  minimum 10 crores 5 years of experience in fund
  management/advisory services, development in
  infrastructure sectorrequire for eligibility of
  Investment manager.
• Project Manager  Project Manager means the
  person who is appointed by InvIT for execution of
  project within time frame. He shall conduct
  management of operational assets as per
  agreement. He will also ensure progress of under
  construction projects, their developments,
  approval status and such other aspects.

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