Introduction to Infrastructure Investment Trusts
Infrastructure Investment Trusts or InvITs is a new product in India, which isn’t very popular among investors. This investment instrument works like mutual funds and is regulated by Securities & Exchange Board of India (SEBI). Predominantly, InvITs encourage the infrastructure sector of India. Like mutual funds, InvITs pool the investors’ capital across income-generating assets by investing in infrastructural assets such as roads, ports, highways, power projects, etc. The income generated is distributed to the investors as dividend income. The units of InvITs are listed on the stock exchange. This investment instrument is a blend of both equity as well as debt.
The investment should be a minimum of 80 per cent in completed and revenue-generating infrastructure projects. Moreover, they cannot invest more than 20 per cent of their assets in other eligible investments such as under-construction infrastructure projects and SEBI-approved equity and debt instruments. InvITs must distribute 90 per cent of their income to their unitholders in the form of dividends. InvITs can be privately held as well as public-listed InvITs. The minimum application value of InvITs has been cut down to Rs 15,000 from Rs 1 lakh by SEBI. As of now, there are 15 InvITs registered under SEBI.
Privately-held InvITs: These are not listed on the Exchanges and cannot be bought or sold via stock exchange. These types of units are held privately by very limited individuals as well as institutions.
Public-listed InvITs: These are listed on the Exchanges and can be bought or sold through the stock exchange by retail investors as well as institutional investors.
How to invest in InvITs?
As the units of InvITs are listed on the stock exchange so, in order to purchase the units of InvITs, you need to have a Demat account. And the other way to invest is via mutual funds. Investment in the infrastructure sector through mutual funds will be very limited if you opt for this route. It might be difficult for small investors to invest in this investment instrument. Before investing in InvIT, one should do proper research about the same and only then, invest in it.