Project finance through Infrastructure Investment Trust: Legal and regulatory analysis

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Abstract

Structured finance, private equity, and public offerings drive a new global real estate and infrastructure age. Given the necessity for increased capital in funding infrastructure projects, a range of equity instruments can be employed to attract institutional investors in both advanced and emerging economies. In recent years, infrastructure sectors, including roads, highways, ports, power, and real estate, have seen increased financial demand and investment trusts have become critical in meeting India’s infrastructural needs. Especially in India, Infrastructure Investment Trusts (InvITs) play a vital role in establishing a well-balanced risk management system, which is essential for addressing infrastructure needs and fulfilling the financial requirements of developers. InvITs were established under the Securities and Exchange Board of India (SEBI) Regulations, 2014, to attract global and local long-term investments for public-private partnership (PPP) and infrastructure projects and to fill gaps in traditional project financing. Despite initial expectations, few projects have utilized this structure since its inception. The author’s review, incorporating doctrinal legal research, analyzes the regulatory framework surrounding InvITs in India. The paper contributes to the literature, emphasizing evidence of India’s programmatic approach to enhancing infrastructure financing and showcasing structural and financial reforms in InvITs governance as integral components of the nation’s strategy.

Keywords: Infrastructure Investment Trust, Special Purpose Vehicle, Project Finance, Structured Finance, Securities and Exchange Board of India

Authors’ individual contribution: Conceptualization — A.K.; Methodology — A.K. and V.S.; Validation — A.K. and V.S.; Investigation — A.K.; Resources — A.K.; Data Curation — A.K.; Writing — Original Draft — A.K.; Writing — Review & Editing — A.K. and V.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G28, K22, O16

Received: 13.08.2023
Accepted: 20.05.2024
Published online: 24.05.2024

How to cite this paper: Kashyap, A. K., & Sharma, V. (2024). Project finance through Infrastructure Investment Trust: Legal and regulatory analysis. Risk Governance and Control: Financial Markets & Institutions, 14(2), 65–76. https://doi.org/10.22495/rgcv14i2p7