Infrastructure Investment Trusts (InvITs)

Example

One of the prominent listed InvITs in India is the Powergrid Infrastructure Investment Trust (Powergrid InvIT). It manages power transmission assets and regularly distributes income to its investors. As of May 2025, its market price is approximately ₹83 per unit, with a dividend yield of about 10.8%.

Key Components

• Sponsor: The entity that establishes the InvIT and contributes initial assets.

• Trustee: A SEBI-approved body that ensures regulatory compliance and protects investors' interests.

• Investment Manager: Responsible for managing the assets and operations, making investment decisions, and overseeing distributions.

• Project Manager: Handles the day-to-day operations and maintenance of the underlying infrastructure assets.

Benefits

• Regular Income: At least 90% of net distributable cash flows (NDCF) must be distributed to investors, often resulting in yields between 6% and 17% per annum as of 2025.

• Portfolio Diversification: Provides exposure to the infrastructure sector, a distinct asset class separate from equity and debt.

• Liquidity: Listed InvIT units can be traded on stock exchanges, allowing investors to enter or exit more easily.

• Professional Management: Assets are managed by seasoned professionals, reducing the need for investors to monitor operations.

• Lower Entry Barriers: Public InvITs typically require a minimum investment of ₹10,000 to ₹15,000 per unit.

Challenges

• Interest Rate and Inflation Risk: Rising interest rates or inflation may erode returns and increase operational costs.

• Regulatory and Policy Risks: Changes in government policies or taxation can affect InvIT performance.

• Limited Capital Appreciation: Returns are primarily income-driven; price appreciation tends to be modest.

• Complex Taxation: Different income streams, such as interest, dividends, and capital gains, are taxed at varying rates, often reducing net returns.

• High Minimum Investment for Private InvITs: Private InvITs usually require investments of ₹1 crore or more, limiting accessibility for retail investors.

Conclusion

InvITs provide a regulated way to invest in infrastructure assets in India. They focus on income while balancing moderate risk. This makes them ideal for investors who want steady cash flows. However, it's important to evaluate the risks, tax impacts, and liquidity issues before investing.