Amid InvIT IPO rush, SEBI gets reclassification report

The number of listed infrastructure investment trusts (InvITs) may go up to 10 this year from five at present, as half-a-dozen such public issues (IPOs) are in the pipeline to raise Rs 25,000 crore. Higher valuations, fuelled by expected high government spending, sectoral prospects and rising demand from domestic investors, are driving these IPOs, said experts Even as this plays out, the industry body, Bharat InvITs Association, has submitted its report on reclassification of the product as equity to SEBI, said chief executive NS Venkatesh. ALSO READ BPCL vs HPCL: Why Jefferies prefers BPCL as top OMC bet Push for equity classification SEBI has suggested to reclassify InvITs and real estate investment trusts (REITs) as equity instruments in a consultation paper in April, with an aim to enhance liquidity. In 2024, SEBI had allowed subordinate units within privately-placed InvITs with inferior rights and options to be reclassified as ordinary units after meeting thresholds. “Globally, these (InvITs) instruments are equity. It is good to have global best practices in markets and product classifications,” said the chief executive of a domestic investment bank which is preparing an InvIT to tap the IPO market. The National Highways Authority of India (NHAI) is planning a large IPO, while EAAA India Alternatives (Edelweiss) is mulling listing of its road assets InvIT. I-Squared Capital’s Cube Highway Trust and private equity major KKR-backed Vertis Infrastructure Trust (₹5,000 crore) are among InvITs planning floats. KKR sponsors two prominent InvITs – Vertis, and IndiGrid, India’s first publicly-listed power transmission InvIT. Vertis raised large debt from PNC Infratech to fund acquisitions, notably road assets. IndiGrid is expanding into solar power generation and battery storage projects. InvITs scale up as infra financing tool India’s first InvIT, IRB InvIT Fund, was launched in March 2016. Since then, they have significantly evolved. These instruments have raised ₹129,267 crore since FY20, majorly contributing to $1.4-trillion investment required in infrastructure to achieve India’s goal of becoming a $5-trillion economy by 2030. There are 27 registered InvITs in India. While calculating returns is challenging for privately-placed InvITs, returns on publicly-listed InvITs have been dull. According to Vinod Kothari Consultants, “This is primarily because investors in these units prioritise steady income through interest and dividend payments over capital gains.” Globally, there are over 1,000 publicly-listed REITs and InvITs, also termed as master business trusts, with combined market capitalisation of $3 trillion. In India, five REITs and 23 InvITs are currently listed on the stock exchanges (both public and private) with market capitalisation of $33 billion. The value of assets under management in InvITs surged from $7.8 billion in FY19 to $73.3 billion in FY25, a 9.4-fold rise, demonstrating their rapid scale-up and growing market relevance. “Over the past decade, InvITs have enabled greater private sector participation in sectors such as roads, power transmission, and renewable energy, offering institutional and retail investors access to assets that were traditionally the domain of government agencies and corporates,” said Shishir Baijal, chairman, Knight Frank India, in the August report on InvITs. While REITs are well-established in the US, the UK, Canada, Australia and Japan, InvITs are prevalent in countries with large infrastructure development needs such as Singapore, Thailand and Hong Kong. The five public-listed InvITs in India are: Capital Infra Trust, Bharat Highways, Powergrid, Indigrid and IRB.