Ever wondered about making money from toll taxes? It might surprise you, but it’s possible through Infrastructure Investment Trusts (InvITs).
There are many infrastructure investment trusts in India that own toll roads and car transmission lines and according to SEBI, InvITs have to give 90% of their income in the form of dividend to their units. So you can simply invest in listed InvITs that own and operate toll roads. Then the higher their toll collection, the higher your dividend income.
InvITs are basically like mutual funds, they are regulated by the Securities and Exchange Board of India. They pull money from investors and invest in infrastructure projects.
InvITs are like a mix of different money tools. These trust units are put up for sale on various trading platforms, kind of like where you buy and sell stocks. They’re a mix of two things – equity (like owning a part of something) and debt (like lending money).
How InvITs Work:
InvITs have units listed on stock exchanges. These units represent a mix of equity and debt instruments. The main goal is to boost India’s infrastructure sector by encouraging more people to invest.
The purpose of InvITs is to enable Infrastructure Companies to repay their debt obligation quickly and effectively. Since infrastructure-oriented projects tend to take time to generate substantial cash flow, InvITs come in handy for paying off loan interests and other expenses conveniently.
Types of InvITs:
- Investment in Finished Projects:
- Allows investment in projects already generating revenue.
- Invites investors through public offerings.
- Investment in Projects under Construction:
- Investors can invest in projects under construction or already finished.
- This type uses private placement of units.
Advantages of InvITs:
- Diversification InvITs let you spread your investments across different things. This helps lower the chance of losing money and allows you to make steady profits over time.
- Accrues Fixed Income: InvITs give you a way to share the risks and make a regular income, which is great, especially for those planning for retirement.
- Liquidity: It’s easy to get in and out of InvIT investments, making them easy to buy or sell. But remember, selling something expensive quickly might be hard for small investors.
- Quality Asset Management: InvITs let experts manage your money and resources well. This prevents your investments from getting scattered and ensures things are handled properly.
- Investors: Parking funds into this investment option allows investors to generate fixed returns on the same. For instance, an infrastructure investment trust has to distribute 90% of its total net cash flow to its investors. It means that investors can generate steady earnings throughout the course of investment. Additionally, investors also receive dividend income on their investment in case the InvITs have surplus cash flow.
- Promoters: By investing in InvITs, promoters would be able to lower their debt burden significantly via an asset sale. Further, promoters can use the proceeds to reinvest in other portfolio projects.
Who Should Invest in InvITs:
Just like stocks, InvITs are available on the stock market through something called an IPO. But you need a minimum of Rs. 10 lakh. That might be a bit too much for regular folks who want to invest directly in InvITs when they first start.
However, big players like rich individuals and large institutions often see InvITs as a good way to make money. This is because they can invest a lot of money and have a good chance of making profits in return. So, while it might be a bit tricky for small investors, the big shots find it a profitable option.
Positive Takeaway:
InvITs offer a unique opportunity for regular individuals to contribute to the growth of India’s infrastructure. By investing in these trusts, people can actively participate in income-generating projects like roads and bridges.
This not only provides a chance for individuals to potentially earn returns but also plays a part in the overall development of the country’s essential infrastructure. It’s a win-win situation where personal investments align with the greater goal of fostering national progress.
