POWERGRID Infrastructure Investment Trust

Infrastructure Investment Trust :

India has a requirement of investment worth Rs. 50 trillion (US $777.73 billion) across infrastructure by 2022 for a sustainable development in the country. This signfies the need for attracting investments in the infrastructure sector. But, As an investor, Infrastructure investments are tricky. It requires really a large capital to create an infrastructure project. And it takes decades for the investor to realise the profits. Either government or companies have to invest in the infrastructure project and they have to wait for decades to garner the benefits. With heavy balance sheets it would be difficult for the infrastructure companies to invest in new projects.

Infrastructure investment trusts(InvITs) are investment instruments that work like mutual funds and are regulated by SEBI. InvITs help players to monetize the revenue generating assets and deleverage their balance sheets. This will allow players to focus on developing new infrastructure projects rather than monitoring the existing assets. And it reduces the burden on banks in the infrastructure development. It allows retail investors to invest in capital intensive infrastructure projects.

An infrastructure investment trust is a trust formed under the Trusts Act and registered under the Registration Act. The parties involved in an InvIT are Sponsors who contributes assets, Trustee who holds assets in trust for the beneficiaries, Investment Managers responsible for day to day operations of InvITs, project managers to manage the assets and the unit holders. A clear structure for InvIT is established by the regulator to ensure better corporate governance.

Regulator mandates distribution of at least 90% of Net distributable cashflows to the unit holders once every six months. It also mandates that 80% of the total assets must be completed and revenue generating. This makes InvITs a better investment option for low risk investors who seeks steady return.