Invit Or Unfit?
Outlook Business|September 15, 2017

The Onion-like Layers of an Invit Camouflage Its Overall Level of Indebtedness and Other Inherent Risks

Chaitanya Dalmia
Invit Or Unfit?

A new financial instrument, which has been introduced in the Indian market after a long wait, is catching the fancy of the investor community. It is expected to dramatically change the complexion of the infrastructure landscape for the asset owners as well as bankers alike. Any change comes with much circumspection and therefore has to be marketed with much fanfare to make headway. So far, so good.

THE CONCEPT

InvIT (Investment Trusts) are infrastructure assets bundled into units that can be subscribed to by investors just like the units of any mutual fund. The only difference is that underlying the former are hard assets while in the case of the latter, they are mostly shares of listed companies. It’s funny that in this case, nakal mein akal nahi lagi. The concept has presumably been ‘borrowed’ from REIT (Real Estate Investment Trust) where the underlying — rented-out properties — generate the return that unit holders get. In case of InvIT, if the “Inv” stands for investment, then what does the ‘I’ stand for? Perhaps the name should have been InfIT (Infrastructure Investment Trust).

THE CONVERSATION

Since it’s a new concept, I requested one of the lead managers to the issue to help me understand the product better since the prospectus is almost 900 pages and a hard-copy is impossible to get by these days (even with lead managers). I was thankful they sent a director-level person. After the initial spiel of the pioneering uniqueness of the offering (which I had to cut short since it was all irrelevant), the conversation went something like this:

Me: Why is the money being raised?

Response: Sir, the InvIT shall use the money to retire independent senior and sponsor subordinate debt in project SPVs.

Me: So basically it’s refinancing…

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