Infrastructure Investment Trusts

Comparative Analysis

Infrastructure Investment Trust (InvITs) vis-à-vis Traditional Investments

# Investors to check the type of income they receive and tax treatment

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 4(c) (Syllabus 2022).

(i)Amendment related to Board nomination rights to unitholders of REITs/InvITs (August 06, 2024)

•Eligible Unitholder(s)shall be entitled to nominate only one Unitholder Nominee Director, subject to the unitholding of such Eligible Unitholder(s) exceeding the specified threshold.

•If the right to nominate one or more directors on the Board of Directors of the Manager/ Investment Manager is available to any entity (or to an associate of such entity) in the capacity of shareholder of the Manager/Investment Manager or lender to the Manager/Investment Manager or the REIT/InvIT (or its HoldCo(s) or SPVs), then such entity in its capacity as unitholder, shall not be entitled to nominate or participate in the nomination of a Unitholder Nominee Director.

•SEBI vide this circular stated that the above restrictions relating to right to appoint a unitholder director shall not be applied if the right to appoint a nominee director is available in terms of clause (e) of sub-regulation (1) of regulation 15 of the SEBI (Debenture Trustees) Regulations, 1993.

(ii)Amendment related to Review of statement of investor complaints and timeline for disclosure of statement of deviation(s) (August 22, 2024).

•To improve ease of doing business related to activities of InvITs and REITs and to align with the provisions of SEBI LODR Regulations, SEBI has amended its Master Circular for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) dated May 15, 2024.

•It is prescribed that the Trustee and the Board of Directors/Governing Body of the Manager shall ensure that all investor complaints are redressed by the Manager in timely manner and statement shall be placed, on a quarterly basis, before the Board of Directors/Governing Body of the Manager and the Trustee for review.

However, the statement of deviation shall also be placed before the Trustee and the Board of Directors/Governing Body of the Manager for review.

•Pursuant to such review, the statement shall be submitted to the stock exchange. Such submission to the Stock Exchange shall be made within twenty one days from the end of each quarter.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 5(a) (Syllabus 2022).

UrbanInfra InvIT must adhere to the following process for re-classifying subordinate units in accordance with the SEBI (Infrastructure Investment Trusts) Regulations, 2014:

(1)The status of achievement of performance benchmark shall be certified by the statutory auditor of the InvIT for reclassification of subordinate units to ordinary units and shall be reviewed by the trustee and the audit committee of the investment manager.

(2)If the performance benchmark is achieved at the end of the entitlement date, including extended period, if any; the subordinate units shall be reclassified into equal number of ordinary units on a pari passu basis in accordance with the terms and conditions of subordinate units mentioned in the Term Sheet.

Explanation 1 - The reclassification can happen for all subordinate units either together or on a piecemeal basis in accordance with the terms and conditions and on the achievement of performance benchmarks as disclosed in the Term Sheet.

Explanation 2 - The subordinate units may be reclassified into ordinary units, in part or in full in accordance with the terms and conditions and on the achievement of performance benchmarks as disclosed in the Term Sheet.

(3)If the performance benchmark is not achieved at the end of the entitlement date, including extended period, if any, the subordinate units shall be extinguished without any payment to the holder of subordinate units.

(4)The board of directors of the investment manager shall consider reclassification of subordinate units into ordinary units or extinguishment of the subordinate units depending on the achievement of the performance benchmark and pass a resolution making the necessary recommendation to this effect to the trustee.

(5)The recommendation for reclassification of the subordinate units into ordinary units or extinguishment of the subordinate units, as the case may be, shall be considered by the trustee and after ensuring compliance with the provisions of these regulations, the trustee may approve reclassification of the subordinate units into ordinary units or extinguishment of the subordinate units, as the case may be, and intimate the same to the investment manager.

(6)Pursuant to the approval of the trustee, the investment manager shall make the necessary intimation to the recognised stock exchange, depositories and the Registrar and Transfer Agent.

(7)The investment manager shall ensure that the record date is disclosed as part of the intimation made under this regulation, at least two working days prior to the record date, excluding the date of intimation and the record date.

Explanation – For the purpose of this chapter, record date shall mean the date from when subordinate units shall be reclassified as ordinary units.

(8)The subordinate units upon being reclassified as ordinary units shall be listed on the recognised stock exchange(s) upon receipt of final listing and trading approval from such stock exchange(s).

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Listing of InvITs

In accordance with the SEBI (Infrastructure Investment Trusts) Regulations, 2014, it shall be mandatory for units of all InvITs to be listed on a recognized stock exchange having nationwide trading terminals, whether publicly issued or privately placed. However, this shall not apply if the initial offer does not satisfy the minimum subscription amount or the minimum number of subscribers as prescribed under the SEBI (Infrastructure Investment Trusts) Regulations, 2014.

Delisting of InvIT units

SEBI (Infrastructure Investment Trusts) Regulations, 2014 stipulates that the investment manager shall apply for delisting of units of the InvIT to SEBI and the designated stock exchanges if: -

a)the public holding falls below the specified limit under the SEBI (Infrastructure Investment Trusts) Regulations, 2014.

b)the number of unit holders of the InvIT falls below the limit as prescribed in the SEBI (Infrastructure Investment Trusts) Regulations, 2014.

c)if there are no projects or assets remaining under the InvIT for a period exceeding six months and InvIT does not purpose to invest in any project in future. The period may be extended by further 6 months, with the approval of unit holders.

d)SEBI or the designated stock exchanges require such delisting for violation of the listing agreement or SEBI (Infrastructure Investment Trusts) Regulations, 2014 or the SEBI Act, 1992.

e)the trustee and investment manager requests such delisting and such request has been approved by unit holders

f)unit holders apply for such delisting in accordance with SEBI (Infrastructure Investment Trusts) Regulations, 2014.

g)SEBI or the designated stock exchanges require such delisting in the interest of the unit holders. Provided that exit shall be provided to dissenting unitholders.

If clause (a) or (b) is breached, the trustee may provide a period of six months to the investment manager to rectify the same, failing which it shall apply for such delisting.

In case of PPP projects, such delisting shall be subject to relevant clauses in the concession agreement.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 4(a) (Syllabus 2022).

In the context of Infrastructure Investment Trusts (InvITs), ‘Anchor Investor’ means a qualified institutional buyer who makes an application for a value of at least ₹ 10 crore in a public issue on the SEBI main board made through the book building process or makes an application for a value of at least ₹ 2 crore for an issue made in accordance with SEBI (ICDR) Regulations, 2018.

Participation by Anchor Investors in the public issue of units of InvITs

•A strategic investor may participate in an offer as an anchor investor.

•The investment manager, on behalf of the InvIT, may allocate up to 60% of the portion available to institutional investors to anchor investors.

•The anchor investors will have to make an application of a value of at least INR 100 million in the public issue.

•Allocation to anchor investor shall be on a discretionary basis, and subject to the minimum of two investors for allocations of up to INR 2.5 billion and minimum five investors for allocations exceeding INR 2.5 billion.

•The bidding for anchor investor before the issue opening date and the allocation must be completed on the same day.

•The number of units allocated and the allocation price must be disclosed on the websites of the stock exchange(s), sponsor(s), investment manager and merchant banker(s) before opening of the issue.

•The anchor investor shall have to bring in the deficit between the cut-off price and the allocation price, if any.

•The lock-in period shall be thirty days for anchor investors other than a strategic investor. However, lock-in should be one year for strategic investors investing as anchor investors,

•Neither the merchant bankers nor any person related to the merchant bankers in the concerned public issue can apply under the anchor investor category, except mutual funds, insurance companies and pension funds.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Pre-requisites for initial offer of units by an Infrastructure Investment Trust (InvIT):

•The InvIT is registered with SEBI

•The value of InvIT assets is not less than ₹ 500 crore. Such value shall mean the value of the specific portion of the holding of InvIT in the underlying assets or holdco or SPVs;

•The offer size is not less than ₹ 250 crore.

As per Regulation 16 of SEBI(Infrastructure Investment Trust) Regulations, 2014, it is mandatory for units of all InvITs to be listed on a recognized stock exchange having nationwide trading terminals, whether publicly issued or privately placed. However, this provision shall not be applicable if the initial offer does not satisfy minimum subscription amount or the minimum number of subscribers as per Regulation 14 of InvIT Regulations. The listing of the units shall be in accordance with the listing agreement entered into between the InvIT and the designated stock exchanges.

With respect to listing of privately placed units, its units shall be mandatorily listed on the designated stock exchange(s) within thirty working days from the date of allotment. With respect to listing of publicly offered units, its units shall be mandatorily listed on the designated stock exchange(s) within twelve working days from the date of closure of the initial public offer.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(d) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Sponsor of InvIT

The Sponsor of an lnvlT is the author of the InvIT and is responsible for transferring or undertaking to transfer the initial portfolio of the assets to the lnvlT and is responsible for the formation transactions involved in setting up and establishing an InvIT. Sponsor is required to lock in 15% or 25% (as the case may be) of the outstanding units of the InvIT, held by it, for a period of three years and any additional unitholding for a period of one year.

Promoter of a Company

Promoter shall include a person who has control over the affairs of the issuer, directly or indirectly whether as a shareholder, director or otherwise, or in accordance with whose advice, directions or instructions, the Board of directors of the issuer is accustomed to act.

A financial institution, scheduled commercial bank, mutual fund, venture capital fund, alternative investment fund, foreign venture capital investor, insurance company registered with IRDA or any other category as specified by SEBI shall not be deemed to be a promotor merely by virtue of the fact that 25% or more of the equity share capital of the issuer is held by such person unless such person satisfies other requirements prescribed under SEBI (Issue of Capital and Disclosures Requirements) Regulations, 2018. A promoter can be reclassified as a non-promoter subject to conditions whereas a Sponsor cannot.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 2(a) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

Regulation 26 of the SEBI (Infrastructure Investment Trust) Regulations, 2014 stipulates that the investment manager shall maintain records pertaining to the activity of the lnvlT, wherever applicable, including-

a)all investments or divestments of the lnvlT and documents supporting the same including rationale for such investments or divestments;

b)agreements entered into by the lnvlT or on behalf of the lnvlT;

c)documents relating to appointment of persons;

d)insurance policies for infrastructure assets;

e)investment management agreement;

f)documents pertaining to issue and listing of units including placement memorandum, draft and final offer document, in-principle approval by designated stock exchanges, listing agreement with the designated stock exchanges, details of subscriptions, allotment of units, etc;

g)distributions declared and made to the unit holders;

h)disclosures and periodical reporting made to the trustee, SEBI, unit holders and the designated stock exchanges including annual reports, half yearly reports, etc.;

i)valuation reports including methodology of valuation;

j)books of accounts and financial statements;

k)audit reports;

l)reports relating to activities of the lnvlT placed before the board of directors of the investment manager;

m)unit holders’ grievances and actions taken thereon including copies of correspondences made with the unit holder and SEBI, if any;

n)any other material documents;

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6(b) (Syllabus 2022).

Right of Unit holders in InvITs

(i)Right to receive returns through cash distributions made by the trust

(ii)Rights to vote on matters pertaining to acquisition of new assets or borrowing

(i)Right to vote on related party matters

(ii)Right to vote on matters such as appointment or change of the Investment Manager

(v)Right to vote on induction of a Sponsor, with the opportunity to exit for dissenting voters

(vi)Right to vote on exit of Sponsor

(vii)Right to receive periodic disclosures like annual report, valuation report, quarterly/semi-annual financials etc.

Part B

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 4(e) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

With respect to distributions made by the InvIT and the Holding company (Holdco) and/or SPV,

(i)not less than 90% of net distributable cash flows of the SPV shall be distributed to the InvIT/ Holdco in proportion of its holding in the SPV subject to applicable provisions in Companies Act, 2013 or Limited Liability Partnership Act, 2008;

(ii)not less than 90 % of net distributable cash flows of the InvIT shall be distributed to the unit holders;

(iii)such distributions shall be declared and made not less than once every six months in every financial year in case of publicly offered InvITs and not less than once every year in case of privately placed InvITs and shall be made not later than 15 days from the date of such declaration;

(iv)subject to above condition, such distribution shall be in the manner as mentioned in the offer document or placement memorandum.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 2(c) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The investment manager shall maintain records pertaining to the activity of the InvIT, wherever applicable, including,–

(a)all investments or divestments of the InvIT and documents supporting the same including rationale for such investments or divestments;

(b)agreements entered into by the InvIT or on behalf of the InvIT;

(c)documents relating to appointment of persons;

(d)insurance policies for infrastructure assets;

(e)investment management agreement;

(f)documents pertaining to issue and listing of units including placement memorandum, draft and final offer document, in- principle approval by designated stock exchanges, listing agreement with the designated stock exchanges, details of subscriptions, allotment of units, etc;

(g)distributions declared and made to the unit holders;

(h)disclosures and periodical reporting made to the trustee, SEBI, unit holders and the designated stock exchanges including annual reports, half yearly reports, etc.;

(i)valuation reports including methodology of valuation;

(j)books of accounts and financial statements;

(k)audit reports;

(l)reports relating to activities of the InvIT placed before the board of directors of the investment manager;

(m)unit holders’ grievances and actions taken thereon including copies of correspondences made with the unit holder and SEBI, if any;

(n)any other material documents.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 2(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

The investment manager shall apply for delisting of units of the InvIT to SEBI and the designated stock exchanges if,-

(i)the public holding falls below the specified limit under the InvIT Regulations.

(ii)the number of unit holders of the InvIT falls below the limit as prescribed in the InvIT Regulations.

(iii)if there are no projects or assets remaining under the InvIT for a period exceeding six months and InvIT does not propose to invest in any project in future. The period may be extended by further 6 months, with the approval of unit holders

(iv)SEBI or the designated stock exchanges require such delisting for violation of the listing agreement or these regulations or the Act.

(v)the sponsor(s) or trustee requests such delisting and such request has been approved by unit holders in accordance with these regulations.

(vi)unit holders apply for such delisting in accordance with these regulations.

(vii)SEBI or the designated stock exchanges require such delisting in the interest of the unit holders.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 3(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).

'Strategic investor' means:

1.an infrastructure finance company registered with RBI as a NBFC ;

2.a Scheduled Commercial Bank;

3.an international multilateral financial institution;

4.a systemically important NBFC with RBI;

5.a foreign portfolio investors;

who invest either jointly or severally not less than 5 % of the total offer size of the InvIT or such amount as may be specified by SEBI with applicable provisions of the FEMA Act, 1999 and the rules or regulations or guidelines made there under.

Following other aspects shall also be considered –

•Holding by strategic investors – Minimum 5%, maximum 25%.

•Holding by public, other than strategic investors and sponsors – Minimum 25%

•Holding by sponsor – Minimum 5%, maximum 70%

•The price at which units are offered to the strategic investors must not be less than the price determined in the public issue.

•It must be ensured that the subscription amount is kept in the separate account until the public issue is opened.

•The units subscribed by strategic investors, pursuant to the unit subscription agreement, will be locked-in for a period of 180 days from the date of listing in the public issue.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 4(b) (Corporate Funding and Listings in Stock Exchanges paper, Syllabus 2017).