Infrastructure Investment Trusts (InvITs) are making news nowadays in the market. From the Securities and Exchange Board of India's recent decision to amend InvITs regulations to make them more attractive to the likely possibility of Airtel and Vodafone Idea to turn their joint venture into a trust, the concept is gaining widespread popularity.
How they work
Simply put, InvITs are similar to mutual funds. They allow individuals and firms to invest a small amount of capital into infrastructure project in return for an income proportionate to their investment. They can be established like trusts and can invest in various infrastructure-related projects either directly or through a special purpose vehicle (SPV).
They can be further classified into two -- those that are allowed to invest in already completed infrastructure projects and those with the flexibility to invest in completed or under-construction projects.
The InvITs are thought to be extremely suitable for a country like India that is experiencing a boom in the field of infrastructural projects and development. With several projects in the country being delayed due to lack of funding, InvIts can help infrastructure developers overcome this hurdle. In addition, they are also seen as a perfect tool to attract international funding.