Infrastructure Investment Trusts (InvITs) are investment vehicles similar to mutual funds that pool money from investors to finance income-generating infrastructure projects. According to reports from Mint, these regulated by Sebi investment schemes provide regular income (dividends/interest) and capital appreciation, requiring 90% of net cash flows to be distributed to investors. The NSE defines InvITs as a 'collective investment scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a portion of the income as return'.
InvITs help infrastructure developers monetize completed assets, reducing debt and freeing up capital for new projects. As reported by Mint, they comprise a sponsor, trustee, investment manager and project manager, holding assets directly or through special purpose vehicles (SPVs). For example, the National Highways Authority of India (NHAI) constructs multiple roads, with each road being an SPV for that purpose. The toll collections from the road are routed to the InvIT that holds multiple SPVs originated by NHAI, providing visibility through historic traffic data and expected GDP growth.
InvITs offer returns through both price appreciation and regular distributions, with distribution yields often in double digits. According to Mint, while equity investments typically provide dividend yields near 1% with returns driven by price appreciation, InvITs offer higher distribution yields that provide certainty to returns. The return calculation includes both price appreciation and interim distributions from multiple SPVs, with the head of money flow clearly mentioned in payout statements.
Allocation to InvITs can serve as a good diversification avenue in investment portfolios, providing hedge against inflation. As reported by Mint, InvITs are relatively inflation-resilient because many underlying infrastructure assets such as roads and transmission lines have tariff structures linked to inflation or periodic escalation clauses. The high credit rating from rating agencies provides another layer of comfort, with entities from multiple sectors including roads, power, telecom, optical fibre, and warehousing.
