InvITs: The next big infra story
Live MintIndia needs a whopping ₹100 lakh crore over the next five years for infrastructure fit out that can lift its growth to the next level, the Union Budget for this fiscal has noted. An InvIT is an investment vehicle created to hold income-generating and operational infrastructure assets such as roads, power transmission lines, gas pipelines, etc. The regulation for InvITs requires them to have at least 80% of their investment in operational assets and also to ensure that at least 90% of the free cash flows are distributed to the investors. These two clauses ensure InvITs have very limited construction risk related to infrastructure assets and also that cash flows generated are used primarily for distribution to unitholders, thereby providing steady returns. CRISIL believes this can increase manifold over the next 2 years, driven by the need of infrastructure developers to monetize their mature assets and also due to strong appetite of global investors looking to invest in India’s infrastructure growth story.