InvITs an invitation for long-term economic growth, say experts

NEW DELHI: InvITs or infrastructure investment trusts are basically investment instruments meant for the infrastructure sector which function like mutual funds and are regulated by SEBI.

In a short span of time, they have emerged as among the most preferred instruments of investment, offering high fixed returns. Experts, in fact, are of the view that InvITs are going to be crucial for long-term growth of the economy.

InvITs consist of four elements, namely a trustee, sponsor(s), investment manager and a project manager.

An InvIT consists of four elements, namely a trustee, one or more sponsors, an investment manager, and a project manager. The trustee inspects the performance of the InvIT, while sponsors promote the entity.

The investment manager is an organisation or a limited liability partnership that supervises the InvIT. The project manager executes the project that is owned by the InvIT.

People who invest in InvITs, become part-owners of operating assets that may include a highway to power transmission line, or in other words, anything which guarantees an annuity return.

InvITs have been garnering fixed income returns in the range upwards of 8 per cent and even touching 11 per cent, for investors.

InvITs promoters use them for monetising operational assets that have a long income generating life. Even the government has been taking the InvIT route to monetise assets.

Some of the major InvITs, which are also listed on the bourses, include the National Highways Infra Trust, PowerGrid Infrastructure Investment Trust and IRB InvIT Fund among others.

PowerGrid Infrastructure Investment Trust is the biggest with a market cap of Rs 11,557 crore.

It has given handsome returns since it was listed just five months back, say experts.

This goes on show that InvITs are gradually becoming one of the preferred routes of investment among common investors in the country, as they offer a safe and fixed rate of returns, say experts.

"InVITs funds have become a major source of funding for the long term infrastructure projects, especially for operating and maintaining," said N.R. Bhanumurthy, Vice Chancellor of the Dr B.R. Ambedkar School of Economics University, Bengaluru.

He further goes on to add that "the returns that are generated, appear to be much better than the returns in other asset classes as this also has some risk involved. Because of this assured and predictiable return, these funds are going to be crucial for long term growth of the economy. With increasing infrastructure deficit and increasing demand for more resources, InVITs will play a major role in the long run".

Many InvITs offer stable returns in the range of 8 to 10 per cent and therefore have gained a lot of attention from investors, both big and small.

In addition to this, they are also expected to get a boost from the government's National Monetisation Plan (NIP), which aims to monetise major government assets between 2022 and 2025.

This plan is likely to push the number of InvITs in the coming years, say experts.