SYLLABUS
GS-3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc
GS-3: Investment models
Context: The Securities and Exchange Board of India (SEBI) has granted in-principle approval for the registration of Raajmarg Infra Investment Trust (RIIT) as an Infrastructure Investment Trust (InvIT) under the SEBI (Infrastructure Investment Trusts) Regulations, 2014.
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- In recent years, NHAI has successfully monetized assets worth ₹48,995 crore through the Toll-Operate-Transfer (TOT) model and raised around ₹43,638 crore across four rounds of Private InvITs, attracting major domestic and international investors.
Raajmarg Infra Investment Trust (RIIT)
- RIIT Trust is a public Infrastructure Investment Trust aimed at enabling broad-based public participation in national highway monetisation.
- The InvIT aims to unlock the monetization potential of the National Highway assets while creating a high-quality, long-term investment instrument primarily targeting retail and domestic investors.
- RIIT will be required to meet specific conditions over the next six months which include appointment of directors, submission of requisite financial statements, and compliance with other regulatory requirements.
Infrastructure Investment Trust (InvITs)
- Infrastructure investment trusts are investment instruments that work like mutual funds and are regulated by the Securities and Exchange Board of India.
- They distribute income generated from these assets to their unit holders.
- InvITs allow infrastructure firms to swiftly settle debts by pooling and monetizing assets that generate delayed cash flows. This mechanism efficiently covers loan interests and operational costs for long-gestation projects.
- Eligibility requirements include:
- A registered trust deed under the Registration Act, 1908.
- Separate entities for trustee, sponsor, and investment manager.
- Sponsor must have a minimum net worth of ₹100 crore.
- Investment manager must have at least ₹10 crore net worth plus relevant sector experience.
- Public InvITs (such as RIIT) must meet additional criteria:
- Minimum asset value of ₹500 crore.
- At least ₹250 crore as the initial offer size.
- Mandatory listing on stock exchanges.
- Must distribute at least 90% of net distributable cash flows on a semi-annual basis.
- Borrowing cannot exceed 70% of the asset value.
Strategic Significance of RIIT
- RIIT’s public InvIT model enhances transparency, strong investor protection mechanisms, best-in-class reporting and compliance standards.
- It widens access to national highway infrastructure investment, enabling participation from retail investors alongside institutions.
- The structure supports government objectives under the National Monetization Pipeline, aimed at mobilizing ₹1.4 lakh crore from road sector assets by 2025.
- It helps ease fiscal pressure while speeding up the development of high-quality highway networks.