How InvITs generate regular cash flow for you by investing in the future

Infrastructure investment trusts are used by firms and governments to cash in on completed projects to raise funds for new ones.

FPJ Web DeskUpdated: Saturday, December 03, 2022, 08:41 PM IST
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Major infrastructure projects such as roads and bridges generate regular income from tolls once they are completed. Power plants are also bound to bring in cash for anything between 40 to 60 years. But infrastructure firms and the government need to generate funds to establish these projects, and you can benefit in the longer run, from early investments in these tangible assets.

Diversifying investments between income generating assets

Rather than placing all bets on one particular project, having a basket of infrastructure projects to split your investment secures returns in the longer run. That’s where an Infrastructure Investment Trust (InvIT) comes into play, as a mutual fund which pools funds to finance roads, powerplants and power transmission networks, among other projects. The investment vehicle is safe, since 80 per cent of the funds must be infused into infrastructure projects which have been completed.

Tangible assets with strong backing

About 90 per cent of the cash generated from the projects is also distributed among investors on a periodic basis, and one can ensure stable cash flow for up to two decades. With India’s infrastructure growing at a rate of 7 per cent, investors can also add more projects to their portfolio. The National Highway Authority of India also issued InvITs this year to fund the expansion of India’s road network at a steady pace.

New age investment to benefit from future growth

Last year global investment company KKR also sold the first ever InvITs in India, which are designed to support green energy projects in India. The investment instruments are regulated by SEBI, and the minimum application value for them has also been raised to Rs 15,000 from Rs 10,000. Investors in India can also trade InvITs without a minimum investment limit or a lockin period, allowing them to exit at any given time.

Primarily aimed at generating funds from completed projects to build new ones, InvITs essentially allow people to invest in the future.

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