In a bid to address funding needs as well as to strengthen infrastructure sector of India, SEBI on Friday released a discussion paper for an independent vehicle for channelizing investments into the sector. On lines of similar structures in countries including the US, Singapore and Hong Kong, Infrastructure Investment trusts (InvITs) is being proposed for mobilizing savings into the sector with an anticipated fund requirement to the tune of Rs. 65 lakh crore during the period from 2012-2017.

The capital market regulator SEBI has put forth two ways for launching schemes under the proposed trust- one via a mutual fund structure and other as a independent structure.

For the first route, SEBi mulls the sponsor of the trust to be either some special vehicle or the developer of the infrastructure. Further, the InvIT will need to include both infrstructure projects that generate cash as well as other pre-completed projects. A minimum of 65% of net assets forming part of the scheme has to be invested in shares of the companies in accordance with equity-oriented mutual fund schemes.

Similar to the initial public offer which is kept open for public subscription, units of the InvIT can be invested in by the public through subscribing to the issued units. Further, akin to the REITs or real estate, the new proposed trust will be required to pay a minimum of 90% of the net distributable profits after tax to investors in the scheme.

As an independent structure, InvIT can be purchased as part of the new regulations and each of the InvIT can be classified on the basis of the projects covered under it.

SEBI also put forth suggestions for the registration of the proposed trust which can register itself as a InvIT that can register as a body with investments into several infrastructure projects or the one with investment into an-year old project generating revenue.

The first set of InvIT will be allowed to mop up funds only from institutional investors with a subscription amount not less than Rs. 5 crore. The second classified InvITs will be allowed to raise funds from any investor category for a minimum subscription of not less than Rs. 10 lakh.

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