Introduction
1. Large scale, efficient Infrastructure is
the basic requirement for any economy to function competitively. This is also
essential to maintain and updated these infra for continuous growth and smooth
running of economy.
With the vision of
Make in India, our Prime Minister has given much emphasis on infrastructure
growth and taking various steps to revive the sector. Several infrastructure
projects which are under development in India are on hold or delayed due to
various reasons. These infra systems are high-cost investments.
The infrastructure
projects comprising roads and highways, ports, power, Communication and water
sanitation projects etc. have been facing severe liquidity crunch due to the
limited funding options, high interest cost and lack of investor interest.
Witnessing the requirement for infrastructure in a country like India coupled
with the huge funding requirements of the infrastructure developers, the structureof InvIT seems to be a much needed and a welcome introduction.
Finance Minister Mr.
Arun Jaitely announces exemption from dividend distribution tax (DDT) by a
domestic company to business trust (InvITs) in his speech in Budget 2016 . This
announcement has suddenly given momentum to attract investor in Infra
companies.
What was the Necessity
of InvITs?
2. Infrastructure projects require huge
capital with long term involvement. Any delay or failure in project may sink
entire fund therefore investor refrain from this sector moreover small investor
cannot participate with the vision of earning on investment. The major reason
for envision of InvITs are as follows:
2.1 Providing wider
and long-term re-finance for existing infrastructure projects.
2.2 Unlocking of tied
up capital
2.3 Attracting foreign
funding
2.5 Diversity of
portfolio
What is InvITs?
3.1 Infrastructure Investment trust (InvITs)
are another form of mutual fund which enable small investor to invest in
infrastructure sector. As the name implies, infrastructure investment trust
invest pooled money of investor in the sector and give return in the form of
dividend to their unit holders.
InvITs can participate
in investment directly or thru SPVs but in case of PPP model investment can be
made only via SPVs.
InvITs are regulated
by SEBI (Infrastructure Investment Trusts) Regulation, 2014. Projects which
will qualify in the definition of Infrastructure have been cited in
notification dated 07.10.2013 issued by Ministry of Finance).
Types of InvITs
4.1 InvITs have been allowed to invest in
two categories:
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a.
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Investment in
completed and projects having revenue
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b.
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Investment in
projects which are under construction
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Registration and
Structure of InvITs
5.1 As per InvITs regulation, InvIT shall
obtain a registration from SEBI in a manner as prescribed. A trust will be
formed and registered for InvIT operation. An application for grant of
certificate of registration as InvIT shall be made by the sponsor in Form A as
specified in the Schedule I and shall be accompanied by a non-refundable
application fee as specified in Schedule II..The trust deed must have main
objective of under taking InvIT in accordance with the InvIT regulation.
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