Page 38 - Banking Finance February 2021

ARTICLE

REITs, the structure and operation of both are quite Project Manager
similar but difference lies in sector specific usage. It comes under Investment Manager. Though they are also
Y Often Infrastructure Projects such as Roads or highways involved in day to day activities, their main aim is to oversee
take some time to generate steady cash flows. the operations and the management of project in which the
Meanwhile the infrastructure company has to repay fund has invested the amount.
the interest to banks for the loans taken by it. An Invit
essentially gives the company the leeway to fulfill its SEBI Regulations - InvITs
debt obligations quickly. 1. They can only be set up as Trust and not Companies or
LLPs
Structure of InvITs 2. They need to be registered with SEBI and the respective

The structure of InvITs can be broken down into four Stock exchange board of the domestic country
elements respectively, that is the Sponsor, Trustee 3. They need to invest minimum 80% of the total asset
Investment Manager & Project Manager. value of the fund in completed Infrastructure Projects
(that is that they are revenue generation phase & have
Sponsor completed construction) with a 3 year lock in period)
The sponsor is the owner of the fund who has the 4. The remaining 20% of the total asset value can be
responsibility of appointing a Trustee for the fund. The invested in the following ways
trustee can be an individual or a company who/which is not Y In the projects under construction directly or
relate to or an associate of the Sponsor. The Sponsor must through Special Purpose Vehicles. However, the
have 25% of the holding in the fund for a lock in period of 3 limit cannot exceed 10% of total asset value.
years. Y Can be used to give out as loans to companies in
Infrastructure sector (But not to another InvITs)
Trustee
Y Can be invested in Stock of Infrastructure
The trustee is a different entity from Sponsor but comes companies whose 80% or more revenue comes
under the Sponsor. Trustee is responsible for overlooking the from infrastructure projects
compliance & regulation guidelines laid down by SEBI.
Y Government Securities
Trustee oversees the functions of the trust.
Y They are invested only in projects in India directly
Investment Manager or through SPV
It comes under the Sponsor but is separate from Trustee. It 5. Dividends guidelines
has the sole purpose of looking at investment opportunities
and carrying out the due diligence work. It handles the 90% of the cash flows generated from Infrastructure
projects or sale proceeds from the project needs to be
aspects related to the investment of the fund.
distributed to investors as dividends every 6 months.

6. Public Offers
Y They need to have total asset value of minimum 500
crores
Y Investor can subscribe minimum 10 lakhs per applicant
Y Minimum offer size - 250 crores
Y Can buy and sell the InvITs in multiples of 5, that is, 5
lakhs, 10 lakhs and so on.

INVITS in India

India Grid Trust (Nov 28, 2016)
Established to own inter-state power transmission assets in

38 | 2021 | FEBRUARY | BANKING FINANCE