InvITs: Gamechanger in the Indian Infrastructure Story!

August 29, 2023

Infrastructure has been the highest capital receiver in 2021, and InvITs continue to be the most favoured investment vehicle for sponsors and global investors alike. InvITs have received >USD 10 billion of investments in the last couple of years, with investments from some of the largest fund houses. The roads regulator of India (NHAI) has also launched its maiden InvIT – with an EV of >USD 1.1bn and participation from large pension funds (CPPIB and OTPP). KKR has again sponsored another InvIT in the renewables space (Virescent Infrastructure) – raising capital from a clutch of investors led by Alberta Investment Management Corporation.

As InvITs flourish, please click below to download our most recent white paper on InvITs which discusses all the key commercial, legal, regulatory and tax considerations relevant to InvITs and the most recent developments in the InvIT regime including the following:

Public float in unlisted InvITs. Unlisted InvITs have been required to have a ‘minimum 5 investor’ holding 25% of the total InvIT units in aggregate. The objective of the amendment to discourage structures that are set up to merely enjoy tax benefits but fail to achieve fresh capital infusion, development of infrastructure and refinancing of existing bank debt;
Offshore debt through the FPI route. InvITs have now been permitted to access offshore debt through the FPI route. With this move, InvITs now have a larger pool of debt capital to tap into, and also expand their portfolio through competitive debt (as against higher cost equity). This may also be the first step towards building a robust infrastructure bond market, which is currently absent in India; and
Amendment in the exit mechanisms in case of takeovers. The takeover norms for public InvITs sponsored by public listed companies have witnessed amendments in respect of timeline and price determination mechanisms for the exits which significantly reduce the pricing and timeline burden for the incoming acquirer.