InVITS: An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return. InvITs work like mutual funds or real estate investment trusts (REITs) in features. InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.
InvITS are like mutual funds in structure. InvITs can be established as a trust and registered with Sebi. An InvIT consists of four elements: 1) Trustee, 2) Sponsor(s), 3) Investment Manager and 4) Project Manager.
The trustee, who inspects the performance of an InvIT is certified by Sebi and he cannot be an associate of the sponsor or manager.
‘Sponsors’ are people who promote and refer to any organisation or a corporate entity with a capital of Rs 100 crore, which establishes the InvIT and is designated as such at the time of the application made to Sebi, and in case of PPP projects, base developer.
Promoters/sponsor(s), jointly, have to hold a minimum of 25 per cent for three years (at least) in the InvIT, excluding the situations where an administrative requirement or concession agreement needs the sponsor to hold some minimum percent in the special purpose vehicle. In these cases, the total value of the sponsor holding in the primary special purpose vehicle and in the InvIT should not be less than 25 per cent of the value of units of InvIT on post-issue basis.