1. InvITs- A New Investment Gateway for Infrastructure Growth in India Customer Care No. 91-11-45562222 www.taxmann.com

2. Introduction 1. Large scale, efficient Infrastructure is the basic requirement for any economy to function competitively. This is also essential to maintain and updated these infra for continuous growth and smooth running of economy. With the vision of Make in India, our Prime Minister has given much emphasis on infrastructure growth and taking various steps to revive the sector. Several infrastructure projects which are under development in India are on hold or delayed due to various reasons. These infra systems are high-cost investments. The infrastructure projects comprising roads and highways, ports, power, Communication and water sanitation projects etc. have been facing severe liquidity crunch due to the limited funding options, high interest cost and lack of investor interest. Witnessing the requirement for infrastructure in a country like India coupled with the huge funding requirements of the infrastructure developers, the structure of InvIT seems to be a much needed and a welcome introduction. Finance Minister Mr. Arun Jaitely announces exemption from dividend distribution tax(DDT) by a domestic company to business trust(InvITs) in his speech in Budget 2016. This announcement has suddenly given momentum to attract investor in Infra companies. 2 Customer Care No. 91-11-45562222 www.taxmann.com

3. What was the Necessity of InvITs? 2. Infrastructure projects require huge capital with long term involvement. Any delay or failure in project may sink entire fund therefore investor refrain from this sector moreover small investor cannot participate with the vision of earning on investment. The major reason for envision of InvITs are as follows: 2.1 Providing wider and long-term re-finance for existing infrastructure projects. 2.2 Unlocking of tied up capital 2.3 Attracting foreign funding 2.5 Diversity of portfolio What is InvITs? 3.1 Infrastructure Investment trust (InvITs) are another form of mutual fund which enable small investor to invest in infrastructure sector. As the name implies, infrastructure investment trust invest pooled money of investor in the sector and give return in the form of dividend to their unit holders. InvITs can participate in investment directly or thru SPVs but in case of PPP model investment can be made only via SPVs. 3 Customer Care No. 91-11-45562222 www.taxmann.com

4. InvITs are regulated by SEBI (Infrastructure Investment Trusts) Regulation, 2014. Projects which will qualify in the definition of Infrastructure have been cited in notification dated 07.10.2013 issued by Ministry of Finance). Types of InvITs 4.1 InvITs have been allowed to invest in two categories: a. Investment in completed and projects having revenue b. Investment in projects which are under construction Registration and Structure of InvITs 5.1 As per InvITs regulation, InvIT shall obtain a registration from SEBI in a manner as prescribed. A trust will be formed and registered for InvIT operation. An application for grant of certificate of registration as InvIT shall be made by the sponsor in Form A as specified in the Schedule I and shall be accompanied by a non-refundable application fee as specified in Schedule II..The trust deed must have main objective of under taking InvIT in accordance with the InvIT regulation. 4 www.taxmann.com Customer Care No. 91-11-45562222

5. Functionaries of InvIT 6.1 An InvIT has 4 parties such as Sponsor(s), Trustee, Investment Manager and Project Manager. Sponsor: Sponsor means any company or LLP or body corporate which sets up the InvIT and is designated as such at the time of application made to the Board and in case of PPP projects, shall mean the infrastructure developer or a special purpose vehicle holding concession agreement. InvIT shall have maximum 3 sponsors. Minimum 100 croresnet worth require for eligibility of sponsor. Sponsor(s), collectively, have to hold atleast 25% in the InvIT for atleast 3 years from the date of listing, Trustee : The Trustee shall be registered with SEBI under the SEBI (Debenture Trustees) Regulations, 1993. Trustee should not be associated with Sponsor's.The trustee will play role of supervisor and look after activities of Investment manager. Trustee ensure that investment manager makes timely payment of dividend to unit holders Investment Manager: Investment Managers manage assets and investments of the InvIT and undertakes activities of the InvIT. Networth of minimum 10 crores & 5 years of experience in fund management/advisory services, development in infrastructure sectorrequire for eligibility of Investment manager. Project Manager : Project Manager means the person who is appointed by InvIT for execution of project within time frame. He shall conduct management of operational assets as per agreement. He will also ensure progress of under construction projects, their developments, approval status and such other aspects. 5 Customer Care No. 91-11-45562222 www.taxmann.com

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