Let’s consider the Trust to be a perpetual entity. It will keep growing by acquiring more assets and distributing returns from the operational cash flows of those assets. The market value of the units at the time of purchase and sale will decide the capital investment and return.

Now let’s consider the Trust to be an entity with a current portfolio of 7 existing underlying assets with a limited life. The capital repayment happens over this lifetime as follows – total projected distribution over Rs. 438/unit over the life of IRB InvIT comprising 38% as a dividend, 36% as interest and a balance of 26% as buyback/capital reduction.

3 kinds of InvITs permitted by SEBI

Regulations of SEBI permit three kinds – Public Listed, Private Listed and Private Unlisted. Listed InvITs become permanent capital vehicles. To acquire new assets for growth, they can raise debt/equity in capital markets. To convert a Private Unlisted into a Private Listed and a Private Listed into Public Listed, there are regulations in place.

Let’s take a look at the features to keep in mind while assigning values to the three kinds of InvITs – Mode of initial offer, minimum asset value, minimum initial offer size, listing requirement, minimum subscription in initial offer, permitted assets, distribution requirement, trading lot, number of investors and borrowing limit.