INTRODUCTION:

Infrastructure investment trust (InviTs) is a unique financial instrument in India, guided by the Securities and Exchange Board of India (SEBI), that allows people to invest in infrastructure projects. Unlike mutual funds or REITs, InviTs focus on infrastructure assets such as toll roads, power transmission lines, and pipelines. The 2014 Infrastructure Investment Trust Regulation sets out rules and regulations, including registration, investment restriction, distribution policy, governance structure, investor protection, listing, and trading. This structure offers investors a diversified portfolio of various projects.

OBJECTIVES:

  • Mobilising the long-term capital from both domestic and international investors for infrastructural development.
  • To analyse and develop critical infrastructure projects like roads, highways, power plants, and telecom towers.
  • To provide stable and regular income to the investors through dividend distributions
  • To maintain the transparency in the infrastructure assets.

REGISTRATION PROCESS:

Application filing -> fee payment -> Securities and Exchange Board of India review-> In-principle approval (optional) -> Final registration (grant a certificate).

GOVERNING STRUCTURE:

  1. Trustee: A person who holds the InvIT’s company and its assets in trust on behalf of the unit holders.
  2. Investment manager: A company or LLP or body corporate that manages the day-to-day management of assets and investment decisions of the InvITs.
  3. Project manager: They are responsible for executing projects and operations, achieving project milestones, and managing assets.
  4. Sponsor: It can be a company, LLP, or body corporate that sets up the overall responsibility and initial operations to achieve success.
  5. Unit holder: Individual or institution who owns a unit of the InvIT.

RULES AND RESPONSIBILITIES:

Trustee: Trustees must be registered with SEBI and maintain independence from the sponsor and manager. Trustees are responsible for safeguarding InvIT assets and overseeing project management agreements. They are also responsible for protecting unit holders’ interests, overseeing operations, and ensuring all the members involved in the Company are working according to the regulations by monitoring the activities of investment and project managers and ensuring compliance with regulations. Trustees also review transactions, address unit-holder complaints, and distribute funds to stakeholders. They have the authority to terminate and appoint investment and project managers.

Investment Manager: Investment managers make crucial investment decisions for the InvIT. They appoint service providers, oversee project managers, and ensure compliance with investment guidelines. They are responsible for unit issuance, listing, and disclosure and addressing unit holder concerns. Investment managers must have a substantial net worth and significant experience in fund management or infrastructure.

Project Manager: Project managers are responsible for managing InvIT assets, particularly construction projects. They are also associates of the sponsor. They ensure compliance with agreements, including PPP concessions, and strive for timely project completion.

Sponsor: Sponsors play a pivotal role in initiating the InvIT, appointing trustees, and transferring infrastructure assets to the trust. They must hold a significant stake in the InvIT and are accountable for various representations and obligations. Sponsors often appoint the initial project manager and may maintain holdings in SPVs for PPP projects. They must meet specific net worth and experience criteria.

ALLOTMENT AND DISTRIBUTION OF FUNDS:

MINIMUM OFFER AND ALLOTMENT TO PUBLIC1: At least 25% of the total outstanding units must be offered to the public. In the case of post-issues, capital is less than Rs 1,600 crores. A minimum value of Rs. 400 crore must be offered to the public, and in the case of post-issue capital, it must be between Rs. 1,600 crore and Rs. 4,000 crore. At least 10% of the total outstanding units must be offered to the public in case of Post-issue capital of more than Rs. 4,000 crore.

FUNDS RAISED BY PRIVATE PLACEMENT1: Must be made through a placement memorandum. The Minimum investment per investor is Rs. 1 crore, or Rs. 25 crore if 80% of assets are completed and revenue-generating. The Maximum subscription from any investor (except sponsors, related parties, and associates) in the initial offer is 25% of the total unit capital.

FUNDS RAISED BY PUBLIC ISSUE1: Must be through an initial public offer (IPO). The minimum subscription amount per investor in initial and follow-on offers is between Rs. 10,000 and Rs. 15,000. Maximum subscription from any investor (except sponsors, related parties, and associates) in the initial offer is 25% of the total unit capital.

In the case of distribution, the price is determined through a book-building process or other Securities and Exchange Board Of India-approved methods.

OTHERS LAWS GOVERNING INVITES:

Similar laws regulate infrastructure investment funds: the Companies Act of 2013, The Income Tax Act, of 1961, and The Foreign Exchange Management Act, of 1999. Indian Contract Act of 1872, Goods and Service Tax Act of 2017,

ONLINE WEBSITES:

  • SEBI website://www.sebi.gov.in
  • Invest India: https://www.investindia.gov.in/

AUTHOR:

Y. J. Jeslin Jesiya, 5th year BBA. LL.B (Hons.), Saveetha School of Law, Chennai

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