#1भारतीय प्रतिभूति और विनिमय बोर्ड Bi Securities and Exchange Board of India GB Introduction to Infrastructure Investment Trusts (InvITs)#2Disclaimer GB ❖ Information contained in this presentation is as on December 10, 2021 The information contained in this presentation is only for Educational and Awareness Purposes related to securities. market. ❖ This presentation is only for Educational and Investor Awareness Programs and shall not be used for any legal interpretations. ✰ SEBI or Stock Exchanges or Depositories shall not be responsible for any damage or loss to any one of any manner from use of this material. ❖ Suggestions or feedbacks, if any, may please be sent by mail to [email protected]. 2#3Flow of Presentation GB 1. 2. 3. 4. 5. 6. 7. What are InvITS? - Overview; Structure of InvITs; Role of Constituents in InvITs; Cash flow in InvITs; Benefits of investing in InvITs; Who can invest in InvITs; How to own Units of InvITs; 8. Rights of unitholders in InvITs; 9. Taxation aspects of InvITs; 10. Points to ponder before investing in InvITs. 3#4What are InvITs? - Overview InvITs stands for Infrastructure Investment Trusts. InvITs are also like mutual funds that pool money from investors. GB InvITs own and operate operational infrastructure assets like highways, roads, pipelines, warehouses, power plants, etc. They offer regular income (via dividends) and long-term capital appreciation. InvITs allow pooling of money from multiple investors into a single trust Trust which is professionally managed by an Investment Manager Investment Manager invests in infrastructure assets or special purpose vehicles (SPVs) holding such infrastructure assets. There are listed InvITs, which are traded on the stock exchanges and investors can buy and sell InvIT units just like trading of shares of any listed company. There are unlisted InvITs as well, in which large institutional investors can participate. 4#5Sponsor ■ Sets up InvIT ■ Lock-in restrictions Trustee ■ Holds InvIT's assets for the benefit of unit holders Structure of InvITs Trusteeship Fee 100% equity GB Investor ■ No lock-in - units freely tradeable from listing date Asset Management Fee Investment Manager InvIT Manages and makes investment decisions in relation to underlying assets | O&M Contracts | SPV 1 SPV 2 SPV 3 Project Manager ☐ Undertake operations and Assets Assets Assets SPV: Special Purpose Vehicles management of InvIT assets 5#6Role of constituents in InvITs GB Sponsor • Trustee Investment Manager Project Manager • • • ● . · • Sets up the InvIT Transfers its shareholdings in SPV / assets to the InvIT Appoints the Trustee Holds the InvIT assets in trust for the benefit of the unit holders Responsible for ensuring that the business activities and investment policies comply with the provisions of the regulations Sets the strategic direction of the InvIT and decides on the acquisition, divestment or enhancement of assets Responsible for all activities related to issue and listing of units Takes decisions on distribution to unitholders Makes disclosures to to various stakeholders as per regulations Ensures redressal of investor grievances Responsible for day-to-day operations and maintenance of the assets 16#7Cash flow in InvITs: An illustration Unitholder Unitholders make investment in to InvIT by subscribing to its units InvIT ■ Distributed to Unitholders ■ For tax treatment in the hands of Unitholders, distributions are divided into Dividend - Interest Return of Capital InvIT invests into SPVS in the form of Equity and debt Distribution in the form of : ■ Dividend ■ Interest ■ Return of Capital SPV 1 SPV 2 SPV 3 GB 7#8Where can an InvIT invest its funds? Bi ➤ At least 80% of the value of a public InvIT to be invested in 'completed and revenue - generating' infrastructure projects. A maximum of 20% of the total value of InvITs can be from: ☐ Under construction infrastructure projects ☐ Listed or unlisted debt of the companies in the infrastructure sector (other than debt of Holding Company/SPV) ☐ Equity of listed companies in India generating at least 80% of their income from the infrastructure sector ☐ Government securities, money market instruments, liquid mutual funds or cash equivalents Privately placed InvITs can have any mix of under construction and completed infrastructure projects. 8#9Key Features of InvITs GB Key Unit Holders' Rights: To vote on matters related to a) material acquisition/borrowing; b)appointment/change of IM; c) induction/exit of a Sponsor Leverage Management: Net borrowing capped at 70% of AUM (if it is rated AAA) Focus Asset Class: Predominantly completed Infra Assets with >=80% of the value of the InvIT from revenue-generating infrastructure projects InvITs Tax Efficiency: Trusts have pass-through structures, i.e., they are not taxed Mandatory Distribution: 90% of the net distributable cash flow must be distributed to unitholders Strong Corporate Governance : Independent trustee & valuers, >=50% independent directors, additional disclosure and rating requirements Presence of Risk Controls and Regulatory Systems Leads to Strong Corporate Governance 9#10Benefits of investing in InvITS InvIT 1 2 Provide Long-term Free Up Developer Capital for Reinvestment Financing Option for Existing Infrastructure Projects into New Infrastructure Projects 3 Low-risk investments offered to attract long- term investors such as insurance and pension funds 4 Facilitation of ownership of LO 5 diversified Infrastructure To Bring Higher Standards of Governance Assets into Infrastructure for retail investors Development and Management 09 6 GB Growth Potential for Investors InvITs facilitate creation of infrastructure assets by providing better financing and ownership opportunity while generating healthy returns for investors 10#11Who can Invest in InvITs? GB ➤ Any investor (domestic / foreign / retail / institutional) can buy InvIT units in India; ➤ The minimum subscription amount for public InvITs is in the range of 10,000 to 15,000/- and the trading lot is 1 unit. (revised w.e.f. July 30, 2021) Previously it was 1 lakh & 100 units, respectively. ➤ Investors can purchase InvIT units through a Demat account, similar to how they would purchase equity shares; InvITs are suitable for those who wants to take price benefits / returns from Infrastructure projects, roadways. InvITs are also suitable for those who wish to have infrastructure sector in their investment portfolio 11#12How to own units of InvITs GB ➤ Investors can own InvITs in following manner: • . By subscribing to issue in Initial Public Issue (IPO) or Follow- on Issue of InvITs, By purchasing units of InvITs from Stock Exchange, where they are listed, Procedures for the bidding, application, payment, and Allotment of InvITs Units in Public Issue (IPO or Follow-on Issue) • . Price of Units shall be determined through Book building process, Investors are required to participate in the Issue only through the ASBA process 12 N#13How to own units of InvITs (.... contd.) GB Investors are required to pay the full Bid Amount or instruct the bank to block the full Bid Amount at the time of Bidding, • Investors should note that Allotment to successful Bidders will be only in the dematerialized form, • • Mention correctly the details of the Bidders' depository accounts including DP ID, PAN and Client ID Bid cum Application Forms, Units of InvITs are listed on a stock exchange within 12 working days from the close of issue. 3 13#14Rights of unitholders in InvITs GB ➤ Right to receive returns through cash distributions made by the trust ➤ Right to vote on matters pertaining to acquisition of new assets or borrowing Right to vote on related party matters ➤ Right to vote on matters such as appointment or change of the Investment Manager ➤ Right to vote on induction of a Sponsor, with the opportunity to exit for dissenting voters Right to vote on exit of Sponsor Right to receive periodic disclosures like annual report, valuation report, quarterly/ semi-annual financials, etc. 14#15Taxation aspects in InvITs GB Nature of Distribution Tax Treatment in the hands of Investor # Interest income Dividends Taxable Exempted (If the SPV has not opted for the lower tax regime) Taxable (If the SPV has opted for the lower tax regime) Revenue from underlying infrastructure assets Taxable # Investors need to check which type of income they receive and applicable tax treatment. 15 5#16Regulations to protect the interests of InvITs unitholders GB Securities Exchange Board of India (SEBI) SEBI (InvITs) Regulations, 2014 ► SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ► SEBI (Prohibition of Insider Trading) Regulations, 2015 Reserve Bank of India Foreign Exchange Management (Non-debt Instruments Rules), 2019 Indian Trusts Act, 1882 Others ► Companies Act, 2013 Competition Act, 2002 16#17Points to Ponder while investing in InvITs GB Stability of income of Trust depends on the stability of income earned from the assets of Trust, ➤ Invest in InvITs which offer better transparency, ➤ Investment in InvITs is to generate income and also to earn capital gains Due diligence to be made before taking investment decisions 17#185. Additional Information EBi □ For Further Information, you may visit following websites: www.sebi.gov.in/ https://investor.sebi.gov.in/ □ For Grievance Redressal, you may visit following website: www.scores.gov.in/ Or, you may call SEBI at following Toll-free Helpline Numbers from 9:00am to 6:00pm on all days (excluding declared holidays in the state of Maharashtra): 1800 266 7575 ➤ 1800 22 7575 Helpline is Available in 8 Languages: English, Hindi, Bengali, Gujarati, Marathi, Kannada, Telugu and Tamil 18#19THANK YOU GB 19