A new model is being formulated by the central government to allow small investors to invest in infrastructure projects. Sharing details about the investment model, Union Road Transport and Highway Minister Nitin Gadkari has said the government will soon list InvITs on stock exchanges so that retail investors can trade in units of InvITs.
“The government will soon list InvITs on the stock market so that retail investors can trade units, offering an opportunity to common citizens to invest in the infrastructure projects,” said Gadkari at the Roads and Highways Summit, organised by industry body FICCI.
The minister said the InvITs assure a 7 to 8 per cent return on an annual basis, reported news agency ANI.
The road transport minister also said the government will approach the capital market next month to raise funds for four road projects. The money will be raised through Infrastructure Investment Trusts (InvITs), and there will be an investment limit of Rs 10 lakh for retail investors.
“In the near future, National Highways Authority of India (NHAI) will be monetising various road projects through a mix of InvITs and toll-operate-transfer (TOT) model,” Gadkari noted.
Here’s what investors should know about InvITs
Infrastructure Investment Trusts (InvITs) are instruments that work like mutual funds and are designed to collect money from a pool of investors to invest in assets that will provide cash flows over a period of time. The trust either invest in road toll projects or power projects. While mutual funds invest the amount received in financial securities, an InvIT invests the money in real infrastructure assets like roads, power plants, transmission lines, pipelines etc.
The collective investment vehicles have a similarity to a mutual fund which facilitate direct investment of money from individual and institutional investors in infrastructure projects. The investments are made in return to earn a small portion of the income.
InvITs allow developers of the infrastructure assets to monetise their assets by pooling multiple assets under a single entity (trust structure). InvITs are guided by the Sebi (Infrastructure Investment Trusts) (Amendment) Regulations, 2016.