I read about the India Grid InvIT IPO, can somebody explain what an InvIT is and how can I invest in it?
Infrastructure Investment Trust (InvITs) are trusts which raise money to invest in projects. They can invest in upcoming projects or completed projects or a mix of both. Their working is similar to a mutual fund - raise money and invest it. So the income generated from these investments will be distributed back to the investors over a period of time.
To safeguard investor interests these trusts need to invest a minimum of 80% in income generating assets and the remaining in under construction projects. When it comes to the distribution of income SEBI has mandated that 90% of the income should be distributed to the investors.
The biggest problem for infrastructure developers to access to funding and they usually raise bank loans. But with InvIT developers get access to long term cheaper funding. It also allows them to monetize their completed projects which they can use to pay off their debt obligations and other purposes.
How to apply for an InvIT IPO?
InvITs are not meant for retail investors and are targeted towards foreign institutional investors, insurance and pension funds, domestic institutional investors and HNIs.SEBI has fixed the minimum application size of ₹10 lakh and post listing the lot sizes will be over ₹5 lakh.
The mode of application will be via ASBA, but it might not show up on some internet banking portals in which case you ca download the application form here and submit it in a bank.
Post listing you can buy/sell them just like stocks.