Current Affairs · Economy and Infrastructure
The Infrastructure Investment Trust (InvIT) mechanism, regulated by SEBI, has emerged as a crucial vehicle for infrastructure finance. Which statement most accurately describes the dual advantage of the InvIT structure for both the Sponsor (developer) and the Institutional Investor in the Indian infrastructure market?
- 1The Sponsor gains exclusive access to cheap foreign debt through the InvIT, while Institutional Investors are mandated to reinvest 100 percent of their dividends back into new infrastructure projects.
- 2It facilitates the financing of Greenfield infrastructure projects with high construction risk, and provides Institutional Investors with a mechanism to convert project equity into a fully tradable bond instrument.
- 3It enables the Sponsor to de-leverage their balance sheet by monetizing operational assets and ensures Institutional Investors receive stable, high-yield cash flows generated from brownfield assets with low execution risk.✓
- 4It allows the Sponsor to bypass all regulatory compliance requirements of SEBI for capital market access, while offering Institutional Investors tax-exempt returns that are guaranteed by the government.
Correct answer
It enables the Sponsor to de-leverage their balance sheet by monetizing operational assets and ensures Institutional Investors receive stable, high-yield cash flows generated from brownfield assets with low execution risk.
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