Infrastructure Investment Fund (InvIT)

InvITs are mutual fund like institutions that can play a crucial role in meeting India’s huge infrastructure requirements, estimated to be Rs 4.3 lakh crore (Rs 4.3 trillion) over the next five years. The InvIT offers an opportunity to promoters of projects to sell their stake in completed projects to the trust, which in turn can raise long-term and tax-free funds from unit holders. Infrastructures developers like IRB, GMR, IL&FS and Reliance Infrastructure are keen to launch InvIT to raise funds, a move which can potentially pump in liquidity in the otherwise cash-strapped infrastructure sector.

Infrastructure is an asset class in India that is garnering attention among investors worldwide and could be the perfect asset for pension plans seeking to match long-term liabilities, diversify portfolio holdings, lower the risk of capital loss and, in some cases, hedge inflation as well.

Hence, large foreign pension plans, foreign endowment funds and many domestic yield focused funds are the targeted investors for InvITs.
InvITs will provide a suitable structure for financing/refinancing of infrastructure projects in the country.

Several existing infrastructure projects in India are delayed due to

·         Increasing debt finance costs

·         Locked up equity of private investors in projects

·         Lack of international finance

·         Project implementation delays caused by global economic slowdown, cost overruns, inability of concessionaire to meet funding requirements on time, etc.

InvITs, as an investment vehicle, may aid:

·       Providing wider and long-term re-finance for existing infrastructure projects.

·       Freeing up of current developer’s capital for reinvestment into new infrastructure projects.

·       Refinancing/takeout of existing high cost debt with long-term low-cost capital and help banks free up their funds for new funding requirements.