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Capital Markets: Challenges and Developments

Raajmarg Infra Investment Trust (RIIT) – NHAI Public InvIT

Prelims Only | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

Why in the news?

SEBI has granted in-principle approval to National Highways Authority of India (NHAI) for registering Raajmarg Infra Investment Trust (RIIT) as an Infrastructure Investment Trust (InvIT) under SEBI (InvIT) Regulations, 2014. It will support asset monetisation of national highways.

What is an InvIT

  • A collective investment structure similar to REITs but for infrastructure
  • Allows ownership of income-generating infrastructure assets
  • Investors receive regular returns from toll/usage revenues
  • Regulated by SEBI

About RIIT

  • Sponsored by NHAI
  • Part of NHAI’s Public InvIT strategy to attract wider retail and domestic participation
  • Operated through Raajmarg Infra Investment Managers Pvt Ltd (RIIMPL)
  • RIIMPL ownership: SBI, PNB, NaBFID, Axis Bank, Bajaj Finserv Ventures, HDFC Bank, ICICI Bank, IDBI Bank, IndusInd Bank, Yes Bank

InvITs and SARFAESI Act, 2002

Infrastructure Investment Trusts (InvITs) are considered borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

What this means

  • When InvITs raise debt from banks or financial institutions, the lenders receive enforceable security
  • If InvITs default on repayment, lenders can:
    • Take over the secured assets
    • Manage or sell the assets to recover dues
    • Enforce security interest without court intervention

SEBI (Infrastructure Investment Trusts) Regulations, 2014

Objective
 To provide a regulated framework for pooling funds from investors into revenue-generating infrastructure assets and ensure transparency, investor protection, and efficient monetization.

Key Features

  • Sponsors, Trust, Trustee, Investment Manager as major participants
  • InvITs can own completed or under-construction infrastructure projects
  • Public InvITs must be listed on stock exchanges
  • Mandatory regular distribution of income to unit holders (at least 90 percent of net distributable cash flow)
  • Minimum 80 percent of the value of assets must be in completed and operational projects for publicly listed InvITs
  • Leverage limits specified to maintain financial stability
Consider the following statements : (2023)

Statement-I : Interest income from the deposits in Infra-structure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable. 

Statement-II : InvITs are recognized as borrowers under the ‘Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’. 

Which one of the following is correct in respect of the above statements? 

(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I 

(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I 

(c) Statement-I is correct but Statement-II is incorrect 

(d) Statement-I is incorrect but State-ment-II is correct

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