Budget 2023: Impact on InvITs

• Distributions out of repayment of debt principal could now be taxed as ‘other income’ – at odds with global standards
• Distributions out of debt repayments through redemption of units not treated as ‘income’, but reduce cost of acquisition – InvIT / REIT Regulations do not permit redemption of units…
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EduInfra – Emergence of a new asset class

• EduInfra offers a promising 10 – 11% entry cap rate for annuity investors with rental escalations in the region of 3
  – 5%

• Infrastructure classification allows for tax optimal exit through InvITs
• Seller awareness needed – operators slowly moving towards asset light models; depth, but potential…
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Listed or Unlisted InvITs – Which way to go?

• Tracking evolution of InvITs – resurgence and success
• Debate between private listed and unlisted InvITs – which way to go?
• Unlisted InvITs remain attractive for investors seeking tax optimal returns and deregulated landscape…
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InvITs: Gamechanger in the Indian Infrastructure Story!

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…