Infrastructure Investment Trust (InvIT)

Recently, the National Highways Authority of India (NHAI) received in-principle approval from the Securities and Exchange Board of India (SEBI) to launch ‘Raajmarg Infra Investment Trust (RIIT)’ as an Infrastructure Investment Trust (InvIT). This development is aimed at mobilising long-term capital for national highway infrastructure development.

What is an Infrastructure Investment Trust (InvIT)?

An Infrastructure Investment Trust (InvIT) is a collective investment scheme, similar in structure to a mutual fund, that enables individual and institutional investors to invest directly in revenue-generating infrastructure projects. InvITs allow pooling of funds to finance large infrastructure assets.

Purpose and Objective of InvITs

The primary objective of InvITs is to provide retail investors access to infrastructure investment opportunities that were previously limited to large institutional investors. At the same time, InvITs help infrastructure developers unlock capital, reduce debt, and recycle funds for new projects.

Structure of Infrastructure Investment Trusts

InvITs are typically established as trusts and are registered with SEBI. They involve four key entities:

• Trustee

• Sponsor(s)

• Investment Manager

• Project Manager

The sponsor, usually an infrastructure company or private equity firm, sets up the InvIT and transfers ownership of the underlying infrastructure assets to the trust.

Role of Trustee and Sponsor

The trustee, who must be certified by SEBI, is responsible for overseeing the performance and compliance of the InvIT. The sponsor acts as the promoter of the InvIT and plays a key role in its establishment and asset transfer.

Issuance of Units to Investors

Once the assets are transferred, the InvIT issues units to investors, which represent proportionate ownership in the trust and the underlying infrastructure assets. Investors earn returns primarily through periodic distributions from the cash flows generated by these assets.

Regulatory Framework

InvITs are governed by the SEBI (Infrastructure Investment Trusts) Regulations, 2014, which lay down guidelines for registration, governance, disclosures, and investor protection.

Significance of the Recent Approval

The approval of Raajmarg Infra Investment Trust (RIIT) is expected to support infrastructure financing, promote asset monetisation, and deepen the capital markets, particularly in the road and highways sector.