Infrastructure Investment Trust Fund: Mind Map for UPSC Exam

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About Trust

Infrastructure Investment Trusts (InvITs) are mutual fund like institutions that enable investments into the infrastructure sector by pooling small sums of money from multitude of individual investors
SEBI notified Regulations, on InvITs in 2014, which provided for registration and regulation of InvITs in India.
InvITs raise funds from a large number of investors and directly invest in infrastructure projects or through a special purpose vehicle.
It will open for subscription on May 3 and close on May 5
It is Sponsored by road developer IRB Infrastructure Developers Ltd.
The trust aims to raise up to ₹4,035 crore.

SEBI Rules

Two types of InvITs have been allowed: one, which invests in completed infrastructure projects; the other, which has the flexibility to invest in completed or under-construction projects.
InvITs which invest in completed projects take the route of public offer of its units.
Those investing in under construction projects take the route of private placement of units.
InvITs are registered as trusts with SEBI and there are four parties — trustee, sponsors, investment manager and project manager.
At least 90% of funds collected, after paying for expenses, taxes and repayment of external debt, should be passed on to investors every six months.
Dividend income received by unit holders is tax exempt. Short-term capital gain on sale of units is taxed at 15%, while long-term capital gains are tax exempt.
The minimum application size for InvIT units is Rs. 10 lakh.

Benefits to Developer

InvITs allow developers of infrastructure assets to monetise their assets by pooling multiple projects under a single entity
Infrastructure projects suffer from lack of availability of long-term capital and have depended on bank finance which typically has a short tenure.
InvITs are designed to attract low-cost, long term capital.
Underlying focus is to reduce the funding pressure on the banking system as well as generating fresh equity capital for infrastructure projects.

Parties

There are four parties — trustee, sponsors, investment manager and project manager.
Sponsors are the firms which set up the InvITs. Investment managers manage assets and investments of InvITs and undertake activities of the InvIT.
The project manager is responsible for executing the projects.
The trustee oversees the role of InvIT, investment managers and project manager and ensures that all rules are complied with.

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