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Renewable Energy, Alternative Investment Funds (AIF) and Infrastructure Investment Trusts (InvITs) in India

August 17, 2020 • DE Energy



By Ruchir Punjabi, Co-Founder, Distributed Energy

 

Infrastructure Investment Trusts (InvITs) are a trust focused on investing in infrastructure, overseen by the regulations of the Securities and Exchange Board (SEBI) in India.

InvITs were created in a mutual fund like structure. There are four key elements to an InvIT – trustee, sponsor, investment manager and asset manager. There are regulatory requirements around each role, designed to protect the investor.

There are two key benefits of InvITs:

  1. The ability for smaller investors to participate. The minimum value for a single lot is Rs 1 lakh for InvITs.
  2. The second benefit is one of a ‘business trust’ which makes InvITs a tax pass through vehicle for dividend and interest income from its investments.
There aren’t many investable structures available for renewable energy infrastructure investment in India and around the world. InvITs and Alternative investment Funds (AIFs) are some of the options for investing in renewable energy assets. However, through our work on an impending renewable energy AIF, we discovered that we are in fact launching India’s first Renewable Energy AIF. Similarly, while there is currently only one electricity infrastructure centric InvIT, there are no renewable energy focused InvITs.

You might be wondering why we’ve considered an AIF as opposed to an InvIT? AIF allows for smaller size of funds as opposed to InvITs, where the minimum size is Rs 500 Crore, with Rs 250 Crore required to be available and subscribed at launch. With an AIF we can start as small as Rs 20 Crore, although the minimum investment size in an AIF is Rs 1 Crore.

Given the hurdles as well as the newness of the asset class, renewable energy has been the domain of rich institutions until now. Vehicles such as an InvIT and AIF not only offers the ability to retail, but also allows high net worth investors to access the asset class and the related returns.

Ultimately, investing in renewable energy is about making money while aligning the investments with one’s core values. i.e. making money while doing good. We are excited and look forward to setting the scene for investing in renewable energy as an asset class moving forward.

Interested in exploring solar energy infrastructure investment in India, East Africa, UAE or Singapore? Reach out to us here.

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