Know About Infrastructure Investment Trusts (InvITs)

If you don’t want to take a risk with the volatility of the stock market but still want to earn better returns than fixed deposits, an Infrastructure Investment Trust (InvIT) might be a suitable investment option. InvITs are investment vehicles that help investors capitalise on the growing infrastructure sector without the hassle of direct ownership. 

In this article, we’ll explore how an InvIT works, as well as its structure, types, and risks, so you can decide if it’s the right choice for your portfolio.

What is an Infrastructure Investment Trust?

Infrastructure Investment Trusts are investment vehicles quite similar to mutual funds. They allow individual and institutional investors to invest in infrastructure projects such as roads, power networks, telecom towers, etc. Returns earned on InvITs are typically distributed as dividend income among unitholders. 

The main aim of InvITs is to provide a steady flow of funding for infrastructure development in India. It ultimately contributes to the country’s overall economic development.

Structure of InvITs

Setting up an InvIT requires four main players:

• Sponsor: The role of a sponsor is to set up the InvIT and provide the initial assets.
• Trustee: A trustee safeguards the interests of unitholders.
• Investment manager: Makes key management decisions regarding asset acquisition.
• Project manager: Project managers usually monitor the daily operations of the infrastructure assets.

Types of InvITs

There are two types of InvITs based on the source of funds:

• Public InvITs: These are listed on stock exchanges and accessible to retail investors.
• Private listed InvITs: Private listed InvITs are listed on recognized stock exchanges but are not open for subscription to retail investors. They are usually reserved for select investors.
• Private unlisted InvITs: These are not listed on stock exchanges and are privately held by institutional investors and corporate bodies.

Benefits and Risks Involved in InvITs

Before investing in InvITs, it’s important to carefully assess the benefits and risks involved to make the right choice.

Benefits of InvITs are: 

• InvITs offer regular income, meant for investors who prioritise steady returns.
• They help in portfolio diversification by providing exposure to infrastructure as a distinct asset class.
• Listed InvITs offer more liquidity as they can be bought and sold on the stock market.

InvIT investment also has the following risks:

• Regulatory changes in government policies that can affect operations.
• Sensitivity to interest rate movements, as rising rates can make InvIT returns less appealing.
• Poor project performance, like operational issues or lower usage, which can affect InvIT earnings and payouts.

Take the Next Step in Smart Investing

Now that you know “What is InvIT?”, take your first step towards InvIT investment with Tata Capital Moneyfy. It lets you compare different investment options on a single platform and offers reliable information to help you make a confident investment decision. Download the Tata Capital Moneyfy app or visit the official website today to explore more.