Infrastructure Investment Trusts (InviTs) are collective investment vehicles 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. In India, InvITs are governed by SEBI (Infrastructure Investment Trusts) (Amendment) Regulations, 2016.

The following are the key features of InvITS:

• InvITs are designed as a tiered structure with a sponsor setting up the InvIT, which in turn, invests into the eligible infrastructure projects either directly or via special purpose vehicles. (SPVs).
• These long-term revenue-generating infrastructure assets, in turn generate cash flows, which are then distributed to the unitholders periodically.
• InvITs are a hybrid between equity and debt investment, i.e., it has features of both equity and debt.
• Public InvIT units can be listed and traded on a stock exchange like equity stocks.
• For example, National Highways Authority of India’s (NHAI’s) InvIT is a trust established under the Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

Significance of InvITs for India’s growth and development:

• Infrastructure creation: InvITs spur infrastructure creation by providing an efficient way to raise capital from investors development. individual and institutional and fund new projects for
• Predictable and stable capital: InvITs help the infrastructure developers to recycle capital locked in long-term infrastructure projects such as roads, transmission lines or renewable assets.
• Attract foreign investment: InvITs attract the interest of foreign investors especially pension funds, sovereign wealth funds and insurance companies.
• Low risk: As per the SEBI regulations, InvITs must invest at least 80% of their assets in projects that are completed and revenue-generating. InvITs cannot invest more than 10% of their assets in under-construction projects.
• Robust corporate governance: Regulatory framework built around InvIT’s incorporates corporate governance, stable long-term returns because of mandatory distribution rules, lower risks, and tax benefits on income distributions.
• High quality assets: InvlTs house long-term infrastructure assets with superior credit quality and low demand and price-related risks, i.e., assured annuity cash flows (pre-regulated cash flows every year) such as power transmission, renewable, telecom towers, roads, and gas distribution.

Despite multiple benefits associated with the InvITs, there are associated risks related to their operation, refinancing, regulation and return. Considering the fact that infrastructure development is pertinent for India’s growth and development, there is a need to address the associated risks.