India will become a $ 5 trillion economy in 12 to 18 months. The increase in GDP has pushed requirements for modern infrastructure. National growth is supported by better infrastructure, including roads, airports, ports, urban centres, industrial parks, multimodal logistics, and so on. The Government of India is committed to improve road infrastructure to reduce logistics costs and improve carriage capacity and time of transport. New greenfield expressways have been planned for faster movement of goods and passengers. New highways have been planned for interconnectivity and reduction in distance. Overall, this will result in reduced time for movement between two destinations. Private-sector participation The transport sector has seen the development of roads by private-sector developers. After development, most of them have sold their assets to long-term investors – over eight to 10 large investors have invested in road assets. The Government has also offered road assets to investors by way of the TOT programme. NHAI has conducted six rounds of successful monetisation of road assets; it has conducted two rounds of asset monetisation by way of transfer of assets to the NHAI InVIT. Attractiveness of InVIT InVIT has become a yield product. Globally called REIT, the product has a market capitalisation of over $ 5 trillion. In such yield products, investors get assured and steady cashflows that are not dependent on volatility in the stock market. InvIT is a hybrid product that gives assured returns like bonds and doesn’t fluctuate like stock prices. It generally gives a return 2-3 per cent better than a bond. A preferred asset holding structure Road assets require long-term financing as they have a long gestation period. Long-term funds can be provided by institutions like pension funds, insurance companies and the Infrastructure Finance Corporation. These institutions have long-term funds with a maturity of more than 15 years. The InVIT has become a preferred holding structure for road assets. It attracts long-term capital in an efficient way from the investor perspective and provides flexibility for investment and divestment of assets. It has gained acceptance owing to the required regulatory changes from time to time and wider acceptability in the investor community. The income-tax exemption to sovereign and pension funds has made them the most preferred vehicle for ownership of assets. Road InVITs The InvIT has come a long way in India. Today, the Road InvIT has AUM of Rs.1,850 billion out of Rs.5,000 billion, the largest asset class. Investors in the roads sector are preferring the structure because of operational flexibility and consolidation of debt at the InVIT level. There are 13 Road InVITs, of which two are publicly listed and 11 are privately public listed and they have over 55,079 km of roads under them. The total revenue of these InVITs is more than Rs.180 billion and there has been growth of over 55 per cent in the past three years. [For details, refer to the table]. Maturity in the market Initially, the InvIT was a product meant for foreign institutions. Road InVITs are owned by large investors like CPPIB, OMERS, CDPQ, I Squared Capital, Sekura, KKR, GIC, etc. But of late, the InvIT has gained acceptance in the domestic mutual fund and pension fund sectors. Even retail investors and HNIs have started investing in these products to balance their portfolio. This has helped in wider acceptance of the product and its maturity. About the author: Vijay Agrawal, Managing Director, Equirus Capital, is a qualified chartered accountant with over 25 years of vast experience in deals across sectors. He heads the infra and real estate practice at Equirus. He has closed over 10 transactions in the infra sector. He was involved in the bid advisory for infra projects like airports, roads, UMPP, sea link projects, desalination plant, etc. He is on the advisory Board of Construction World Magazine and the Jury for the Annual Construction World Awards, a prestigious infra sector award.