What are inVITs?
inVITs are a new type of investment product that is becoming increasingly popular in the financial world. But what are they? And why are they gaining so much traction? In this blog post, we will explore inVITs: what they are, how they work, and why they may be a good investment option for you. So if you’re curious about this new investment trend, read on!
What are inVITs?
InVITs are investment trusts that invest in infrastructure projects. They are similar to real estate investment trusts (REITs), but instead of investing in buildings or land, InVITs invest in infrastructure projects such as roads, bridges, and power plants.
In order to qualify as an InVIT, a trust must meet certain requirements set by the Securities and Exchange Board of India (SEBI). For example, an InVIT must have at least five investors, with each investor contributing a minimum of INR 10 crore (approximately USD 1.5 million). The trust must also have a minimum asset size of INR 500 crore (approximately USD 75 million).
In addition to the SEBI requirements, an InVIT must also adhere to the guidelines set forth by the Ministry of Finance. For example, an InVIT cannot invest more than 25% of its assets in a single project.
Once an InVIT is established, it can raise money from investors through initial public offerings (IPOs) or private placement offers. The money raised is then used to finance infrastructure projects. Investors in an InVIT typically receive regular dividends from the trust. These are generated by the revenue generated from the underlying infrastructure projects.
What are the types of inVITs?
There are three types of inVITs: exchange-traded, closed-end, and open-ended.
- Exchange-traded inVITs are similar to exchange-traded funds (ETFs) and are listed on a stock exchange.
- Closed-end inVITs are not listed on a stock exchange and typically have a fixed number of shares.
- Open-ended inVITs are similar to mutual funds and continuously issue new units.
What is the purpose of inVITs?
inVITs are investment trusts that invest in infrastructure projects. They are designed to provide long-term, stable returns by investing in a diversified portfolio of infrastructure assets.
The purpose of these is to provide investors with exposure to a broad range of infrastructure assets and to provide stable, long-term returns. InVITs offer investors the opportunity to participate in the growth of the global infrastructure market without the need to directly invest in individual projects.
What are the advantages of inVITs?
The key benefits of investing in an inVITs are:
- Long-term, stable returns: Infrastructure assets typically have long lifespans and generate predictable cash flows. This leads to stability in an investment’s performance over time. This makes them an attractive option for investors looking for stability in their portfolios.
- Diversification: By investing in a basket of infrastructure assets, investors can diversify their portfolios and reduce the overall risk of their investments.
- Professional Management: They are managed by professional fund managers with extensive experience investing in infrastructure projects. This expertise helps to ensure that the underlying assets are managed effectively and generate the expected returns for investors.
- Investment trusts are also flexible: they can be used to target specific investment goals, such as income generation or capital appreciation. Since they are not publicly traded on stock exchanges, they can be easier and cheaper to set up and manage.
What are the disadvantages of inVITs?
There are a few disadvantages of inVITs that investors should be aware of before investing. One downside is that they are not as liquid as other investments such as stocks or mutual funds. This means that it may be more difficult to sell your inVIT units if you need the money right away. Additionally, they tend to have higher fees than other types of investments, so you’ll need to carefully consider whether the potential returns are worth the extra costs. Finally, inVITs are relatively new and there is still some uncertainty surrounding them. As with any new investment, there is always a risk that it could lose value or underperform.