Infrastructure Investment Trusts (InvITs) generate revenue through various means, including:
- Rental Income: InvITs invest in income-generating infrastructure assets, such as toll roads, airports, and power transmission lines. The rent or lease payments received from the users of these assets generate a steady stream of income for the InvIT.
- Capital Appreciation: As the value of the infrastructure assets owned by the InvITs increase over time, the value of the InvITs also increases, providing capital appreciation to the investors.
- Interest Income: InvITs may also invest in debt instruments issued by infrastructure companies or projects, such as bonds or debentures, and earn interest income from these investments.
- Dividend Income: Some infrastructure companies or projects may pay dividends to the InvITs as a return on their investment.
- Management Fees: InvITs usually appoint a professional asset management company to manage their assets. These asset management companies charge a management fee for their services, which is paid by the InvIT.
- Performance Fees: In addition to the management fee, asset management companies may also receive a performance fee if they exceed certain performance benchmarks.
Overall, the revenue generated by InvITs is distributed to the unit holders in the form of dividends or interest payments. InvITs are considered to be a tax-efficient investment option, as they are exempt from dividend distribution tax and capital gains tax.