The infrastructure investment trust (InvIT) market in India has grown exponentially in recent years. Since their introduction, these asset classes have evolved significantly, with notable improvements in structure and regulation, bringing clarity and confidence among stakeholders. From roads and energy to digital and industrial infrastructure, InvITs are increasingly shaping the country’s long-term investment landscape. At a recent India Infrastructure conference, leading InvIT platforms shared their perspectives on the current operating environment, growth opportunities, challenges arising from geopolitical volatility and future strategies. Edited excerpts…
How is the current operational environment for InvITs in your sector, and what are the current opportunities and challenges?
Krishnan Iyer
Over the past few years, the operating environment of the economy has undergone significant structural changes. In the pre-Covid 19 era, economic performance was robust; however, by 2019, several headwinds had emerged, and the pandemic eventually brought economic activity to a halt in 2020. As the world adapted, the economy gradually began to recover and expand. During the Covid period, the logistics and warehousing sector underwent significant structural shifts as consumer behaviour moved rapidly toward e-commerce. This accelerated the need for modern, organised warehousing infrastructure across the country. In response to this emerging demand, NDR InvIT expanded its portfolio by adding over a million square feet of capacity, positioning itself to serve large e-commerce and retail clients effectively.
Today, while overall macroeconomic indicators remain stable, the industry continues to view the near-term environment with measured optimism. Private final consumption expenditure has recovered but remains uneven across categories, which has kept new investment decisions cautious. Since warehousing demand is closely linked to consumption activity, a more broad-based pickup is expected as policy measures such as GST rationalisation and ongoing supply-chain reforms translate into stronger on-ground momentum.
“The critical factors to track are the level of distributions an InvIT aims to make, the revenue required to support those payouts, and occupancy levels that must be maintained to achieve that revenue.” Krishnan Iyer
Mahesh Iyer
As India’s economy expands, energy will remain a prime driver of growth. Significant investment has been witnessed in oil and gas (O&G) upstream in the Krishna Godavari basin and liquefied natural gas terminals along the east coast. Given this, Pipeline Infrastructure Limited (PIL) finds itself in a favourable position as it is the only pipeline infrastructure player authorised by the Petroleum and Natural Gas Regulatory Board to connect that market to industries in the north, west and south. With the government’s focus on increasing the share of natural gas from around 6 per cent to 15 per cent, the sector has significant opportunities for growth.
“In the near term, as a number of InvITs are planning to convert from private to public, the holding lot size will decrease to 1 unit from the current 25,000 units, leading to a lot of small investors entering the system and benefiting from this unique investment asset class.” Mahesh Iyer
Rahul Katiyar
Digital infrastructure continues to face robust demand as data consumption per user grows exponentially. India now consumes an average 22 GB per month, at par with some of the developed economies of the world. As per reports from industry experts, this figure is expected to more than double over the next five years, crossing 50 GB per month per user. As a result, demand for digital infrastructure, including towers, in-building solutions, fibre and data centres, will continue to rise sharply. The sector’s key challenge, persisting for nearly a decade, is that the average revenue per user remains among the lowest globally. The price hikes taken by the telecom operators have been a positive step, enabling them to improve cash flows and support future growth. In essence, while the organic growth opportunity is massive, commercial viability must be favourable.
“InvITs need to be marketed in a way that makes them more understandable to investors.” Rahul Katiyar
Gaurav Malhotra
In the past decade, the renewable energy sector has witnessed tremendous growth. Challenges around land acquisition, connectivity and related issues persist; however, the country still added around 30 GW of renewable capacity last year, compared to just 4-5 GW a decade ago. This rapid expansion has also benefited the InvITs operating in the renewable space.
As the share of renewable energy sources in the grid increases, challenges related to intermittency have become more central. Power plants now face stringent norms on scheduling and deviation, resulting in additional costs, alongside curtailment issues at generating plants. With renewables expected to play a larger role in meeting climate targets and energy security, the battery storage segment will play a key role.
“Going forward, as more InvITs are launched and the market deepens, dedicated mutual fund schemes investing solely in InvITs will emerge, boosting investor participation.” Gaurav Malhotra
Harshael Sawant
In the roads sector, project awards have remained subdued over the past two years, while an aggressive bidding environment in the hybrid annuity mode (HAM) space persists. To fund the next round of capex, the National Highways Authority of India plans to focus on asset monetisation, with around 1,500 km targeted in 2025-26. However, a key concern emerging in the sector is whether there will be adequate investor appetite for the next cycle of asset recycling, given the aggressive bidding patterns witnessed so far.
“A key concern emerging in the road sector is whether there will be adequate investor appetite for the next cycle of asset recycling, given the aggressive bidding patterns witnessed so far.” Harshael Sawant
Rajeev Vijay
InvITs are long-term assets and, therefore, there is a critical need for policy stabilisation. In the roads sector, parliamentary discussions are under way on toll rate rationalisation. The sector has been the largest adopter of InvITs, turning it into one of the most successful programmes globally. In this context, whatever decision the government takes should have a favourable impact across the sector. Public-private partnerships (PPPs) in the road sector will continue, and while toll rates may be rationalised, interests of existing investors should be protected for continued confidence and encouragement of retail participation. Given the significant revenues generated under road sector InvITs, policy stabilisation will be critical.
“Given the significant revenues generated under road sector InvITs, policy stabilisation will be critical.” Rajeev Vijay
Which investor classes are currently active in InvITs, and what new categories are being targeted to broaden participation? What measures can help deepen and diversify the InvIT investor base?
Krishnan Iyer
The Association of Mutual Funds in India played a pivotal role in popularising mutual funds among retail investors. A similar role is now being played by the Bharat InvITs Association, to create awareness, enhance investor understanding and promote these products in order to support retail participation and build trust.
Mahesh Iyer
Currently, banks, mutual funds and high net worth individuals account for the largest shareholding in PIL. The platform is now looking to expand its investor base by onboarding insurance companies.
Recently, the Insurance Regulatory and Development Authority of India also proposed doubling the investment limits for InvITs – a move that is expected to support this objective. Similarly, the Employees Provident Fund Organisation is also considering increasing its exposure.
Since InvITs are a long-term asset class, they are naturally well-suited for pension funds and insurance companies, whose investment outlooks are also long-term. On the regulatory front, norms for InvITs need to be eased, as current requirements are more stringent than those for equities.
Also, we need to do a lot more of investor education and marketing to increase awareness about investments in InvIT. In the near term, as a number of InvITs are planning to convert from private to public, the holding lot size will decrease to 1 unit from the current 25,000 units, leading to a lot of small investors entering the system and benefiting from this unique investment asset class.
Rahul Katiyar
To boost participation, InvITs need to be marketed in a way that makes them more understandable to investors. The asset class must be simplified and presented clearly for both institutional and retail audiences. Significant efforts are required from the industry to create awareness and build confidence among investors.
Gaurav Malhotra
Sustainable Energy Infra Trust has a broad investor base comprising corporate treasuries, insurance companies and domestic alternative investment funds. Overall, in the InvIT market, a significant share of investments is controlled by foreign or domestic sponsors, while retail participation remains below 5 per cent. This highlights the need to increase the share of domestic capital in the long run, as foreign investors will eventually exit.
On the regulatory front, the tax incidence on the dividend and interest portion distributed by InvITs is currently treated in the same manner as debt instruments. In contrast, if InvIT units are held within a mutual fund structure, investors are only subject to capital gains tax on redemption, which is a far more favourable outcome. Going forward, as more InvITs are launched and the market deepens, dedicated mutual fund schemes investing solely in InvITs will emerge, boosting investor participation.
Harshael Sawant
SEBI has been working on several consultation papers, including those on restrictions for mutual funds investing in specific InvITs and the creation of a combined InvIT index. These initiatives are aimed at enhancing liquidity and market volumes.
A recent SEBI consultation paper has proposed classifying all qualified institutional buyers, such as provident funds and pension funds, as strategic investors. This would allow them to invest at the trust level during a fresh issue or rights issue, thereby helping attract greater domestic institutional capital into InvITs.
Rajeev Vijay
Currently, mutual funds are struggling to deploy retail funds in InvITs. To address this challenge, massive retail investor education and promotion need to be undertaken through the promotion of SIP investment in this asset class.
How do movements in capital markets or stock markets and changes in interest rates affect your InvITs?
Krishnan Iyer
InvITs are ultimately in the business of providing stable yields to their investors. To achieve this, the critical factors to track are the level of distributions an InvIT aims to make, the revenue required to support those payouts, and occupancy levels that must be maintained to achieve that revenue. Performance can broadly be assessed by three metrics: profitability, measured through net operating income; operational efficiency, tracked through vacancy rates; and leverage, determined by the mix of debt and equity.
For instance, NDR InvIT has consistently maintained 98 per cent occupancy over the past four quarters. While Indian warehousing is largely insulated from global market conditions, interest rate fluctuations can have an impact at a broader level. To mitigate this risk, the InvIT is focusing on tapping long-term capital, ensuring stability and sustained investor confidence.
Mahesh Iyer
For PIL, which operates in the O&G sector, the uncertainty does not lie on the demand side, as there is always a ready buyer. The real challenge is on the supply side, since production volumes depend on resource extraction. The scientific estimates are available; however, what can actually be extracted from nature always remains uncertain. The price of natural gas that we use for operating our compressors and gas engines also has an impact on the returns to the unit holders. Another key factor influencing the returns to unit holders is the refinancing rate that the InvIT is able to secure.
Rahul Katiyar
The biggest challenge for InvITs is the mismatch between debt tenor and revenue contracts. Typically, revenue contracts run for 10-30 years, whereas debt available in the market is usually for 7-10 years. This refinancing scenario creates a mismatch for InvIT’s business model. On the positive side, in the recent past refinancing has been relatively smooth, supported by instruments such as non-convertible debentures. It is also important to note that India has been in a stable or even declining interest rate regime for some time now, which has made refinancing easier and lowered the overall risk.
However, the longer-term solution lies in long-tenor debt availability. Altius has recently successfully placed a 15-year NCD, anchored by NaBFID, a first in the telecom tower industry.
Gaurav Malhotra
Sustainable Energy Infra Trust has a stable annuity-based cash flow. As part of its strategy, the trust is converting floating-rate liabilities into fixed-rate liabilities. However, fixed-rate borrowings are typically available only for 7-10 years, which exposes the InvIT to some degree of refinancing risk. To mitigate this, the InvIT ensures that no more than 15 per cent of its outstanding debt comes up for refinancing in any given year. Moreover, by maintaining an AAA rating and adhering to the Securities and Exchange Board of India’s leverage norms, the overall risk remains manageable.
Harshael Sawant
For road InvITs, such as Indus Infra Trust, where portfolios are largely HAM-based, the annuity payments are linked to the repo rate, which results in decrease in revenue in a falling interest rate regime and increase in revenue when repo rates increases. As our borrowings are also linked to the same benchmark, a natural hedge is provided to the InvIT. We are currently comfortably placed, with our borrowing rates at the trust level. However, in the current interest rate cycle, other road InvITs are actively tapping the bond market to lock in low-cost funding.
Rajeev Vijay
Currency volatility amid the prevailing geopolitical scenario, including US tariff policies, is likely to influence the outlook of foreign institutional investors towards India. Recently, mutual funds have witnessed significant outflows, while the impact on InvITs is yet to be seen. Going forward, such volatility may dampen foreign institutional investment in InvITs.
What are the new avenues and future strategies you are looking at over the next few years?
Krishnan Iyer
NDR InvIT is exploring the addition of industrial asset capacities through its right of first offer (ROFO) pipeline. The focus will be to cater to customers in sectors such as automotive components and assembly plants. In addition, the rapid expansion of quick commerce is creating new opportunities. The InvIT plans to position itself as an intermediary, bridging the gap between quick-commerce platforms that move inventory at high speed and large fast-moving consumer goods or durable goods companies.
Mahesh Iyer
PIL intends to remain predominantly within the O&G sector, while gradually expanding into the broader energy space. Going forward, the InvIT plans to evaluate opportunities in segments such as terminals, city gas distribution networks and oil pipelines, as well as dedicated pipeline assets connecting ports directly to refineries.
Rahul Katiyar
Altius Telecom Infra Trust will continue to focus on the connectivity space, particularly in the telecom tower and in-building solutions segments. The sharp rise in data consumption per user is expected to remain a key driver of growth.
Gaurav Malhotra
The primary focus of Sustainable Energy Infra Trust is to maximise the potential of its existing assets and establish itself as the leading operator of solar power plants in the country. Future growth will be fuelled by its strong ROFO pipeline of solar assets.
Harshael Sawant
Indus Infra Trust has a ROFO pipeline comprising 19 HAM assets in the roads sector. The InvIT is also planning to acquire third-party HAM assets from the market and is exploring opportunities in toll projects.
Rajeev Vijay
The emerging areas for InvIT participation include warehousing and logistics. In the airports sector, PPP models have already gained some traction, with a few large players that could potentially explore InvITs. Railways is another segment that may see increased uptake in the future. In contrast, in the transport sector, the road InvIT market has already reached a relatively mature stage.
