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NATIONAL MONETISATION PIPELINE
Copyright © NITI Aayog, 2021
NITI Aayog, Sansad Marg, 
New Delhi-110001
Designed by
NATIONAL 
MONETISATION 
PIPELINE
VOLUME I: MONETISATION GUIDEBOOK NATIONAL MONETISATION PIPELINE
Volume I : Monetisation Guidebook
GOVERNMENT OF INDIA
NEW DELHI Infrastructure is critically linked to growth and economic performance. Benefits of higher
investment in good quality Infrastructure manifest in the form of increased employment
opportunities, access to market and materials, improved quality of life and empowerment
of vulnerable sections. Recognizing the importance of infrastructure, the Government has
continued its focus on sustaining and stepping up the pace of infrastructure investment.
Investment led growth is therefore, central to the economic agenda of the Government
and one of the pre-requisites of Investment led growth is capital and asset recycling. Asset
recycling and monetization is the key to value creation in Infrastructure by serving two
critical objectives, unlocking value from public investment in Infrastructure and tapping
private sector efficiencies in operations and management of infrastructure.
Under the Union Budget 2021-22, Monetization of Assets has been identified as one of
the three pillars for enhanced and sustainable infrastructure financing in the country. The
Budget also envisioned preparation of a “National Monetisation Pipeline” (NMP) to provide
a direction to the monetisation initiative and visibility of investors. In pursuance of the
same, NITI Aayog was tasked with creation of the National Monetisation Pipeline (NMP)
for brownfield core infrastructure assets.
The NMP has been created to be co-terminus with the balance NIP period, 4 year period
from FY2022 to FY2025. The NMP has been prepared based on inputs and consultations
from the respective line ministries and departments along with an assessment of the total
asset base available. The NMP document has been developed and is structured as two
volumes (Volume I & II) wherein the Volume I is being developed as a Guidebook comprising
of conceptual overview, instruments, steps involved and key reform imperatives. Volume II
comprises of the pipeline of Central Government ministries / sector wise citation of assets
along with phasing and overview of assets. The NMP is meant to serve as an essential
roadmap for the Asset monetisation of various brownfield infrastructure assets across
roads, railways, shipping, aviation, power, telecom, oil & gas, and warehousing sectors.
Asset monetisation, based on the philosophy of ‘Creation through Monetisation’, will
tap institutional investment and long term patient capital into stable mature assets in
turn generating financial resources for new infrastructure asset creation . This will enable
Preface
iii.!"! economic growth, generating employment opportunities and better prospects for
country’s youth.
Availability of a sustained and robust asset pipeline has been cited as a key concern
by investors to the Government at various forums. A well laid out pipeline hence gives
a comprehensive view to investors & developers of brown-field investment avenues in
Infrastructure. The NMP will also form a baseline for the asset owning ministeries for
monitoring and tracking performance of the potential assets. The NMP is aimed at creating
a systematic and transparent mechanism for public authorities to monitor the initiative
and for investors to plan their future activities. I hence consider the NMP document to be
a critical step towards making India’s Infrastructure truly world class.
The Government as part of a multi-layer institutional mechanism for overall implementation
and monitoring of the Asset Monetization programme, has constituted an empowered
Core Group of Secretaries on Asset Monetization (CGAM) under the chairmanship of
Cabinet Secretary. Detailed deliberations with the line Ministries and Departments on
the asset pipelines have been undertaken at the meetings of the CGAM chaired by the
Cabinet Secretary.
The NMP is a culmination of insights, feedback and experiences consolidated through
consultations with the concerned line Ministries and Departments, multi-stakeholder
consultations and a series of one-to-one consultations with prominent global investors
conducted over the last six months.
Asset Monetisation programme and the NMP took shape because of the vision and
conviction of our Hon’ble Prime Minister who has always encouraged us to pursue
excellence in delivering Infrastructure to common citizen of India. I am grateful to Hon’ble
Finance Minister for the landmark Union Budget 2021, her inspiration and encouragement
that made this report possible. In this endeavour, we owe our deepest gratitude to the
Cabinet Secretary, under whose guidance, the Monetisation programme has and continues
to gain momentum. I also thankfully acknowledge the support provided by the members
of the CGAM, Secretary (DEA), Secretary (Revenue), Secretary (Expenditure), Secretary
(DIPAM), Secretary (DPE), Secretary (Corporate Affairs), Secretary (Legal Affairs) and all
the Secretaries of the relevant ministries and departments in development of the NMP.
None of this would have materialised without the unflinching support and guidance of the
head of our institution, Dr. Rajiv Kumar, Vice Chairperson who inspired us in our endeavour
to prepare and launch the NMP with a vision to serve as a roadmap for India’s Asset
Monetisation programme. Finally, a deep sense of gratitude to the Asset Monetisation
team at NITI Aayog : Partha Sarathi Reddy, Alpna Jain, Arpana Bhatt and Sujit Jena, for
their remarkable efforts in working relentlessly during the pandemic to research and create
the NMP. Lastly, the support provided by CRISIL team towards our work on NMP needs
a special mention.
We thank all the members for their support and contribution.
New Delhi
Amitabh Kant
July, 2021CEO, NITI Aayog .!" fi!
ivVolume I: Monetisation Guidebook
1. Infrastructure Imperative 1
1.1 Infrastructure: An Enabler of Growth 2
1.2 Investment Plan & Financing under NIP 3
1.3 Initiatives under Union Budget 2021-22 4
1.4 Asset Monetisation – The Concept 4
1.5 National Monetisation Pipeline 7
1.6 Organization of this Guidebook 8
2. Asset Monetisation— Framework and Instruments 9
2.1 Core Asset Monetisation 10
2.2 Core Asset Monetisation Framework 12
2.3 Monetisation Models 14
2.4 Direct Contractual models – Brownfield PPP Concessions 16
2.5 Long Term Lease 23
2.6 Infrastructure Investment Trust 24
2.7 Real Estate Investment Trust 29
.8 Factors determining choice of model 34
3. Asset Monetisation Experience: India and Beyond 35
3.1 Australia’s Asset Recycling Initiative (ARI) 36
3.2 Indonesia’s Limited Concession Scheme (LCS) 40
3.3 REITs in non-traditional real estate sectors 42
3.4 Other notable transactions 44
Contents
vContents 4. Preparatory Stage 47
4.1 Overview 48
4.2 Step 1 – Preparation of asset monetisation and financing plan 48
4.3 Step 2 – Asset Screening and Packaging 49
4.4 Step 3 – Transaction Structuring 50
4.5 Step 4 – Approval/ sanction 51
5. Transaction Stage 53
5.1 InvIT – Regulatory framework and process 54
5.2 REIT – Regulatory framework and monetisation process 57
5.3 PPP Concession based models – Framework and process 60
6. Key imperatives for Monetisation 63
6.1 Recent initiatives by Government of India 64
6.2 Key Imperatives 66
7. Annexure 71
Annexure I : Circulars, rules and guidelines pertaining to InvIT 72Contents
viVolume I: Monetisation Guidebook LIST OF FIGURES
Figure 1: Infrastructure Vision 2025: Meeting aspirations and improving ease of living 2
Figure 2: Sources of financing for NIP 3
Figure 3: Initiatives under Budget 2021-22 4
Figure 4: Asset Monetisation Structure 6
Figure 5: Infrastructure Asset Monetisation Cycle 6
Figure 6: Objectives of the National Monetisation Pipeline 7
Figure 7: Core and Non-Core Asset Classes 10
Figure 8: Asset Monetisation Eco-System and Benefits to Stakeholders 13
Figure 9: Framework features for Core Asset Monetisation 13
Figure 10: Core Asset Monetisation approaches 15
Figure 11: Brownfield PPP Models 16
Figure 12: OMT Broad Structure 17
Figure 13: OMD Structure 20
Figure 14: Long term Lease Models 23
Figure 15: InvIT transaction – Illustrative structure 25
Figure 16: Key Benefits of InvIT 26
Figure 17: InvIT transaction – Illustrative steps 27
Figure 18: REIT transaction – Illustrative structure 30
Figure 19: Benefits and Limitations of REIT 31
Figure 20: Illustrative ARI process 37
Figure 21: Major public assets monetised under the ARI 38
Figure 22: Notable investors participating in Australia’s Asset Recycling Initiative 38
Figure 23: Key features of Indonesia’s LCS initiative 41
Figure 24: Process roadmap 48
Figure 25: Sectorial investment and financing plan – Illustrative steps 49
Figure 26: Steps in project structuring 50
Figure 27: End to End Process for Project Preparation 51
Figure 28: Elements of SEBI InvIT Regulations 54
Figure 29: Step by Step Issuance Process 56
Figure 30: Procedure for Public Procurement 61
Figure 31: Imperatives for Asset Monetisation 67Contents
viiVolume I: Monetisation Guidebook LIST OF TABLES
Table 1: Snapshot of Infrastructure asset base under key public sector entities 11
Table 2: Features of Direct Contractual mode 15
Table 3: Features of Structured Financing Instruments 15
Table 4: Key Terms of an OMT Concession 17
Table 5: TOT bundles bid out by NHAI till date 18
Table 6: Key Terms of an OMD Concession 20
Table 7: Key Features of Lease 24
Table 8: Key Requirements/ Terms of an InvIT 26
Table 9: Key InvIT transactions 27
Table 10: Key Requirements/ Terms of an REIT 30
Table 11: REIT transactions in India 33
Table 12: Salient features of SEBI InvIT Regulations 2014 54
Table 13: Salient features of SEBI REIT Regulations 2014 57Contents
viiiVolume I: Monetisation Guidebook AcronymDefinition
Acronym Definition
AAIAirports Authority of India
BOOBuild-Own-Operate
BOQBill Of Quantities
BOTBuild-Operate-Transfer
BPCLBharat Petroleum Corporation Ltd
BSEBombay Stock Exchange
BSNLBharat Sanchar Nigam Limited
CCOCoal Controller’s Organisation
CEOChief Executive Officer
CERCCentral Electricity Regulatory Commission
CILCoal India Limited
CODCommercial Operations Date
CPSECentral Public Sector Enterprise
CRWCLCentral Railside Warehouse Company Limited
CWCCentral Warehousing Corporation
DFCCIL Dedicated Freight Corridor Corporation of India Limited
DFIDevelopment Finance Institution
DWTDeadweight Tonnage
EPCEngineering, Procurement and Construction
ESGEnvironmental, Social and Governance
FBBFixed Broadband
FCIFood Corporation of India
List of
Abbreviations
ixList of Abbreviations FDIForeign Direct Investment
GAILGas Authority of India Limited
GISGeographic Information System
HAMHybrid Annuity Model
HPCLHindustan Petroleum Corporation Limited
IDBIIndustrial Development Bank of India
IOCLIndian Oil Corporation Ltd.
IPAInitial Portfolio of Asset
IRSDCIndian Railway Stations Development Corporation Limited
JLNJawaharlal Nehru Stadium
JNPTJawaharlal Nehru Port Trust
LFPLand Fall Point
LILOLoop-In-Loop-Out
LMTLakh Metric Tonnes
LNGLiquefied Natural Gas
LPGLiquefied Petroleum Gas
MCAModel Concession Agreement
MCLRMarginal Cost of Funds-based Lending Rate
MDOMine Developer and Operator
MFCMulti-functional Complexes
MIRAMacquarie Infrastructure and Real Assets
MIVMaritime India Vision
MMLHMulti Modal Logistics Hub
MMTPAMillion Metric Tonnes Per Annum
MTNLMahanagar Telephone Nigam Limited
MTPAMillion Tonnes Per Annum
MVAMega Volt Amp
NBFIDNational Bank for Financing Infrastructure and Development
NDCPNational Digital Communications Policy
NHAINational Highways Authority of India
NHPCNational Hydroelectric Power Corporation
NIPNational Infrastructure Pipeline
NITINational Institution for Transforming India
NLCNLC India Limited (formerly Neyveli Lignite Corporation Limited)
NMPNational Monetisation Pipeline
NRPNational Rail Plan
NSENational Stock ExchangeList of Abbreviations
xVolume I: Monetisation Guidebook NSECNetaji Subhas Eastern Regional Centre
NSSCNetaji Subhas Southern Centre
NSWCNetaji Subhas Western Centre
NTPCNational Thermal Power Corporation Limited
OFCOptical Fibre Communication
OHEOver Head Equipment
OMDAOperations, Management and Development Agreement
OMTOperate Maintain and Transfer
ONGCOil and Natural Gas Corporation Limited
ORROuter Ring Road
PEGPrivate Entrepreneurs Guarantee
PFCPower Finance Corporation
PFTPrivate Freight Terminal
PGCILPower Grid Corporation of India Limited
PNGRBPetroleum and Natural Gas Regulatory Board
PPPPublic-Private Partnership
PUAPipeline Usage Agreement
RECRural Electrification Corporation
REITReal Estate Investment Trust
RFPRequest for Proposal
RFQRequest for Qualification
ROWRight of Way
RPORenewable Purchase Obligations
RTMRegulated Tariff Mechanism
SAISports Authority of India
SARODSociety For Affordable Redressal Of Disputes
SEBISecurities and Exchange Board of India
SECISolar Energy Corporation of India
SJVNLSatluj Jal Vidyut Nigam Limited
SPVSpecial Purpose Vehicle
STPSSuper Thermal Power Station
TBCBTariff Based Competitive Bidding
TEUTwenty Feet Equivalent Unit
TOTToll-Operate-Transfer
TSATransmission Service Agreement
USDUnited States Dollar
WPIWholesale Price IndexList of Abbreviations
xiVolume I: Monetisation Guidebook Infrastructure
Imperative
1
Infrastructure Imperative 1 1.1 INFRASTRUCTURE: AN ENABLER OF GROWTH
Investment in infrastructure is pivotal for accelerated and inclusive socio-economic
development of a country. In the absence of adequate and robust infrastructure facilities,
the economy operates at a sub-optimal level remaining distant from its potential and
frontier growth trajectory.
With such imperative–to bridge the existing infrastructure gaps and cater to its future
potential and needs–the Government of India (GoI) undertook a first-of-its-kind and a
whole-of-government exercise in FY 2019-20, to lay the infrastructure vision for the country.
Pursuant to which, the National Infrastructure Pipeline (‘NIP’), detailing the infrastructure
vision for the country, was released in December 2019. As per the Report of the Task
Force for NIP:
‘..The vision, mission and strategic goals would be towards improving the ease of living or physical quality of life for each individual in the country. And investment in infrastructure would aim to achieve the aspirational standards in consonance with SDG -2030 for same..’
Imperativeness of such vision and large-scale infrastructure investment has only been more pronounced with the recent coronavirus (COVID) pandemic. With the crisis taking an unprecedented toll on the economic activity in the country, significantly enhanced level of infrastructure investment is critical for reviving growth. Furthermore, the crisis has emphasised the need for resilient, environmentally sustainable and technologically advanced infrastructure systems, which in turn necessitates targeted approach towards SDG based aspirational standards under NIP.
Figure 1: Infrastructure Vision 2025: Meeting aspirations and improving ease of livingInfrastructure Imperative
2Volume I: Monetisation Guidebook 1.2 INVESTMENT PLAN & FINANCING UNDER NIP
During the twelfth plan period, infrastructure investment in India aggregated to Rs 36 lakh
crore, averaging at ~5.8% of GDP. Further, for FY 2018 and 2019 it has been estimated at
~Rs 10 lakh crore
1
. Going forward, the NIP envisions a significant step-up from the current
levels. This is largely in view of recommended infrastructure investment levels of 7-8% of
GDP
2
, so as to ensure requisite capacity and quality of infrastructure within the country.
NIP envisages infrastructure investment of Rs. 111 lakh crores over five-year period from FY 2020 to FY 2025. With annual average investment of ~Rs. 22 lakh crore, this is a significant step-up (~2.5 times) vis-à-vis historical levels of spending on infrastructure.
Achievement of incremental annual investment of 2-3% of GDP
3
, as envisaged under NIP,
has the potential to enable double digit economic growth (for corresponding period)
for the country. Which in turn will ensure enhanced economic activity and employment
opportunities in a post-crisis economy. Successful and timely implementation of projects
planned under NIP, hence, remains a key focus area for both Central and State Governments.
One of the major pre-requisites for this, however, is the availability of capital. Under NIP,
traditional sources are expected to finance 83–85%
4
of the envisaged capital expenditure.
This includes ~18-20% financing through Centre’s budgetary resources and 24-26% through
the States’ budgetary resources. Another ~40% is proposed to be raised through extra-
budgetary resources/ private sector investment (in form of debt from bond markets/
banks/ non-banking financial companies, by way of equity from private developers/
internal accruals of PSUs and external aid from multilateral/ bilateral agencies).
Further, as estimated by the NIP task force report, about 15-17% of the outlay is to be
met through innovative and alternative initiatives viz. asset monetisation, funding through
a new Development Finance Institution (DFI) etc. Of which asset monetisation has been
suggested as a tool to monetise operational assets at both Central and State levels.
Budgetary Sources Private or Extra Budgetary Sources
Innovative and
alternative
financing sources
Central Budget (18-20%)
Financing by Banks (8-10%)
Innovative and
alternative financing
(15-17%)
Bond Markets (6-8%)
State Budget (24-26%)
Infrastructure NBFCs (15-17%)
PSU Accruals, Equity and Others
(8-15%)
Figure 2: Sources of financing for NIP
1 R
2 E
3 Based on envisaged outlay, as percentage of GDP, vis-a’-vis previous period investment during
FY 2013-19
4 RInfrastructure Imperative
3Volume I: Monetisation Guidebook 1.3 INITIATIVES UNDER UNION BUDGET 2021-22
GoI’s commitment towards realising the vision for country’s infrastructure has been further
put in motion via the Union Budget 2021-22. In line with the recommendations of NIP
task force report, Budget 2021-22 has laid out a three-pronged strategy for enhanced and
sustainable infrastructure financing in the country. This entails:
i.
Creation of institutional structures;
ii. Thrust on monetisation of assets, and
iii. Enhanced share of capital expenditure in Central and State budgets.
~Rs 3.8 lakh crore has been allocated as capital outlay for various infrastructure projects under Union Budget 2021-22
5
. This is broadly in line with the recommended quantum
of funding for the corresponding period, through Central budgetary resources, under NIP. Such enhanced budgetary outlay
6
, in addition to accelerating projects envisaged
under NIP, is aimed at inducing a multiplier impact
7
towards fulfilling the more immediate
objective of reviving economy in a post COVID scenario.
From a medium to longer term perspective, the Budget proposes the following initiatives
for creating a sustainable institutional framework for funding of infrastructure assets in
the country:
Development Finance Institution (DFI)Asset Monetisation
Professionally managed DFI to act
as provider, enabler and catalyst for
infrastructure financing
Monetising operating public infrastructure
assets for new infrastructure construction
National Bank for Financing Infrastructure
and Development Bill (2021) passed in
March 2021
A body corporate with initial GoI holding of ~100% (more than 26% at all times)
Initial share capital of Rs 20,000 crore
Target Lending portfolio: Rs 5 lakh crore (3 years)
National Monetisation Pipeline of potential brownfield infrastructure assets
Asset Monetisation dashboard for tracking progress and for providing visibility to investors
Various assets/ asset classes targeted for monetisation during FY 2021-22
Figure 3: Initiatives under Budget 2021-22
8
1.4 ASSET MONETISATION – THE CONCEPT
Financing of infrastructure investments requires a diversified set of alternatives, especially
so in emerging economies like India. And the scale at which it has been currently envisaged
under NIP, it can only be made possible through a re-imagined approach, and a look
5 Union Budget 2021-22 – Expenditure Profile
6 2 times the Revised Estimates for FY 2020-21 as per Union Budget 2021-22 – Expenditure Profile
7 2X based on comparative assessment of countries by S&P Global ratings (2018);
8 PInfrastructure Imperative
4Volume I: Monetisation Guidebook beyond the traditional sources or models of financing. It is, therefore, that NIP has
emphasized on innovative mechanisms–such as asset monetisation–for generating
additional capital.
The need for adoption of such alternative mechanisms
has only been further pronounced in the wake of
COVID-19. On one hand, the budgetary imperatives
of social sector priorities and economic stimuli limit
fiscal headroom. While simultaneously, reduction in
risk appetite of private developers/ equity investors
and debt financiers. limit private investment in
greenfield infrastructure. This invariably necessitates
innovative mechanisms, structured around mature
brownfield assets, for tapping of private sector
investment.
A sizeable inventory of infrastructure assets has been created over the past decade through
public investments. This can now be leveraged for tapping private sector investment and
efficiencies.
The strategic objective of Asset Monetisation programme is to unlock the value of investments in public sector assets by tapping private sector capital and efficiencies. Which can thereafter be leveraged for augmentation/ greenfield infrastructure creation.
Asset monetisation, also commonly referred to as asset or capital recycling, is globally a widely used business practice. This consists of limited period transfer of performing assets (or disposing of non-strategic / underperforming assets) to unlock “idle” capital and reinvesting it in other assets or projects that deliver improved or additional benefits. Governments and public-sector organizations, which own and operate such assets and are primarily responsible for delivering infrastructure services, can adopt this concept to meet the ever-increasing needs of the population for improved quality of public assets and service. However, suitable structuring of such transactions is extremely critical from the perspective of public interest and service aspects.
Asset Monetisation, as envisaged here, entails a limited period license/ lease
9
of an
asset, owned by the government or a public authority, to a private sector entity for an
upfront or periodic consideration.
Transfer of such rights in lieu of an upfront/ periodic consideration is defined by a well-
defined concession/ contractual framework. This enables a balanced risk sharing framework
between the public authority and private party. The private sector entity is expected to
operate and maintain the asset based on the terms of the contract/ concession, generating
returns through higher operating efficiencies and enhanced user experience. Funds, so
received by the public authority, are reinvested in new infrastructure or deployed for other
public purposes. Such contracts include provision for transfer of asset back to the public
authority at end of such contract.
9 Sale i.
5Infrastructure Imperative Volume I: Monetisation Guidebook Public Authority
Asset / Rights
Private Investor(s)
Operations &
Maintenance
Concession
Consideration
Figure 4: Asset Monetisation Structure
Asset Monetisation needs to be viewed not just as a funding mechanism, but as an overall
strategy for bringing about a paradigm shift in infrastructure operations, augmentation
and maintenance. This is especially considering the potential for resource and capital
efficiencies as also the ability to dynamically adapt to the evolving global and economic
reality.
It presents an opportunity for public asset owners to avail new financial structures
10
and
vehicles for tapping capital from private sector investors (strategic, institutional, retail
etc). In the process, it helps public sector authorities/ entities in easing fiscal constraints
and freeing up the balance sheets for taking up more greenfield infrastructure creation.
This enables deployment of resources by government towards social sector and other
competing public priorities.
Figure 5: Infrastructure Asset Monetisation Cycle
10 SimplisInfrastructure Imperative
6Volume I: Monetisation Guidebook 1.5 NATIONAL MONETISATION PIPELINE
For Asset Monetisation initiative, to progress in the right direction, it is imperative that
the Government makes available a strong pipeline of attractively structured, brownfield
projects. Further, sustained flow of transactions and visibility on same, across asset
classes, is a key pre-requisite of long-term investors. A robust asset pipeline, not only
enables investors to plan their fund raisings and investment timelines, but also helps
asset owners track and scan the performance of assets.
Within this context, National Monetisation Pipeline (NMP) was announced in the Union
Budget 2021-22 and NITI Aayog has been entrusted with the mandate to develop
National Monetisation Pipeline.
Asset Monetisation being inextricably linked to new infrastructure creation, NMP has
been planned to be co-terminus with the remaining four-year period of the National
Infrastructure Pipeline (NIP). NMP forms a baseline for the asset owning ministries for
monitoring and tracking – investment, performance and data on potential assets, for
the 4-year period from FY 22 to FY25. The Report on National Monetisation Pipeline
has been structured as a (i) Guidance book for Asset Monetisation (Volume I) and
(ii) Medium-term Roadmap including the pipeline of assets (Volume II). NIP and NMP,
together, are envisaged to give a comprehensive view on greenfield and brownfield
investment avenues in Infrastructure.fiffffi fl ff   ffi flfffl
   ffiffi 
 ffi flff   ffiffi  
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ffi     ffff 
 ffiffi 
fiffffiffffi  ff ff  
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Figure 6: Objectives of the National Monetisation Pipeline
NMP will prima-facie help in evolving a common framework for monetisation of core assets. It will critically clarify its distinction from privatization, eventually helping to create a virtuous cycle of ‘develop, commission, monetise and invest’. It will also help in identifying potential “Monetisation-ready” projects, across various infrastructure sectors/ ministries and simultaneously provide visibility to investors.
7Infrastructure Imperative Volume I: Monetisation Guidebook Infrastructure Imperative Volume I: Monetisation Guidebook A well strategized Asset Monetisation programme:
!Is structured around:
—Monetising assets with high appetite among investors; and
—Reinvesting proceeds into assets/services that citizens desire.
!Helps new asset creation:
—Without necessarily increasing debt levels or taxes or through reallocation of
resources from other public services/ welfare activities;
!Targets efficiency gains, competition and improved performance monitoring
!Enhances investment opportunities, depth and liquidity in infrastructure as an
asset class
—Effectively incentivizing specialized investor classes (viz. domestic and foreign pension funds, etc.)
1.6 ORGANIZATION OF THIS GUIDEBOOK
Volume I (Guidance book) is structured as a ready-reckoner for public authorities and investors while going about the asset monetisation process, particularly in the context of India. It presents guidance on the various models, global case studies, preparatory actions, the regulatory framework and asset monetisation process.
The Guidance book is divided into six sections aligned with the tasks to be carried out
towards asset monetisation:
Section 1: Infrastructure Imperative: Setting the context of the Asset Monetisation;
Section 2: Asset Monetisation – Framework and Instruments: Categories,
models and instruments for asset monetisation including examples for better understanding of structures;
Section 3: Asset monetisation experience: India and beyond: Experiences on asset monetisation/ recycling from the developed and other emerging markets and key takeaways;
Section 4: Preparatory Stage: Steps in identifying assets, selecting the right
instruments etc. and approval and sanction process before initiating an asset monetisation transaction;
Section 5: Transaction Stage: An overview of the regulatory framework for respective instruments;
Section 6: Key imperatives for Monetisation: Imperatives for efficiency and efficacy of Asset Monetisation initiative.
8 2
Asset Monetisation—
Framework and
Instruments
This section provides an overview
of the approach to core asset
monetisation, in India’s context.
This includes key tools,
instruments including
their broad features,
benefits and
limitations
etc.
Asset Monetisation— Framework and Instruments 9 2.1 CORE ASSET MONETISATION
The assets held by the government/ public sector entities/statutory bodies broadly include
operational/ under-construction projects, land, buildings, investment in subsidiaries/ joint
ventures etc . From amongst these,
Assets which are central to the business objectives of such entity and are used for delivering infrastructure services to the public/ users are considered as Core Assets for the purposes of monetisation herein.
Infrastructure
11
includes asset classes such as transport (roads, rail, ports, airports), power
generation, transmission networks, pipelines, warehouses etc. The other assets, which generally include land parcels and buildings, can be categorised as non-core assets.
Figure 7: Core and Non-Core Asset Classes
Of the various Core Assets, assets which are currently generating revenue OR those which have substantially completed facilities and can be suitably augmented for future operations have been considered as potential Core Assets for monetisation herein.
2.1.1 Core Asset Base
Investment, as measured by Gross Fixed Capital Formation (GFCF), has on an average been 30% as a component of GDP in the previous 5-year period i.e. FY 2017 – FY 2021
12
.
This capital formation has been led by mega public investment programmes such as Bharatmala, Sagarmala, Dedicated Freight Corridor, Jal Shakti and Pradhan Mantri Awas Yojana etc.
Owing to several years of such large-scale public investment programmes, a significant
public infrastructure asset base has been created at the level of CPSEs, departments and
11 Based on the Harmonized Master list of Infrastructure sub-sectors published by Department of Economic
Affairs
12 NaAsset Monetisation— Framework and Instruments
10Volume I: Monetisation Guidebook statutory entities, both within the Central as well as State government. A snapshot of
the scale of core assets, managed across key Central Government entities and sectors, is
provided in table below.
Table 1:
Snapshot of Infrastructure asset base under key Central govt. public entities
13
S.No. Asset class Ministry / entity
Key asset
variableValue
1 Roads Ministry of Road
Transport & Highways
through National
Highways Authority of
India
Length of
National Highway
network
132,499 km
14
2 Power
transmission
Ministry of Power
through Power Grid
Corporation of India
Ltd.
Transmission
network and
substations
171,950 km transmission
lines, 262 sub-stations
with 444,738 MVA
transformation capacity
15
3 Power
generation
National Thermal Power
Corporation (and its
JVs & subsidiaries)
Thermal
generation
60,224 MW
16
4National Hydroelectric
Power Corporation
National Thermal Power
Corporation
Hydro &
renewable
generation (Solar)
4,912 MW (NTPC and
its JVs & subsidiaries)
7,071 MW (NHPC)
5 Airports Airport Authority of
India
Number of AAI
airports
137 airports
17
6 Ports 12 Major Port Trusts Handling capacity
of major ports
1535 MMTPA
18

7 Telecom
Towers
Bharat Sanchar Nigam
Ltd
Mahanagar Telephone
Nigam Ltd
Number of
telecom towers
69,047 towers
8 Optical Fibre
Cable
Bharat Broadband
Network Limited
Length of optical
fibre cable
5,25,706 km (laid under
Bharatnet)
19
9 Railway
Stations
Indian Railways Number of
railway stations
pan India
7,325 stations
20
13 As
14 https://nhai.gov.in/nhai/sites/default/files/NationalHighwaySummary.pdf
15 https://www.powergridindia.com/company-overview-0
16 https://www.ntpc.co.in/en/power-generation/installed-capacity
17 https://www.aai.aero/en/corporate/organization
18 http://shipmin.gov.in/sites/default/files/BPS2020.pdf
19 http://bbnl.nic.in/
20 Indian Railways Annual Reports 2019-20Asset Monetisation— Framework and Instruments
11Volume I: Monetisation Guidebook 11 Railway
Track
Indian Railways Track network 1,26,366 track km
(67,956 route length)
20
12 Natural gas
pipeline
Gas Authority of
India Ltd, Indian Oil
Corporation Ltd &
others
Length of
operational
pipeline network
19,998 km
21
13 Petroleum
& products
pipeline
IOCL, HPCL, BPCL, OIL Length of pipeline
network
14,623 km
21
14 Warehouses Food Corporation of
India,
Central Warehousing
Corporation & other
agencies
Warehousing
capacity
818 lakh MT
22
15 Sports
stadium
23
Sports Authority of
India,
Ministry of Youth Affairs
& Sports
Number of Sports
Stadia & regional
centres
5 national stadia
and various Regional
centres
24
2.2 CORE ASSET MONETISATION FRAMEWORK
Governments regularly invest in new infrastructure creation by way of budgetary
allocations. Asset Monetisation approach for such assets, enables a whole lifecycle and
system-wide perspective, combining monetisation and new infrastructure creation into a
long-term view. It leverages the capital tied up in existing infrastructure assets and aims
to reap potential benefits by monetising these assets and directly reinvesting capital
proceeds for creation of new or improvement of existing infrastructure.
Asset monetisation has two inextricably linked facets;
aLease or divestment of rights over existing assets; and
aReinvesting in new infrastructure.
While in the past, divestment of rights over existing assets has been carried out by
government and public-sector organizations, the proceeds from such divestment have
not necessarily been invested in new infrastructure creation. Further, such divestment has
largely been focussed on stakes in companies/ subsidiaries or occasionally in non-core
assets such as land or building. Lease or long-term concession of core operational assets,
in a manner which garners upfront funds and can thereafter be leveraged/ invested in
other infrastructure assets, has rather been occasional/ sector-specific. Given however the
benefits of this approach, agencies such as National Highways Authority of India have
deployed such mechanisms for upfront fund raising and new infrastructure creation. There
21 https://www.pngrb.gov.in/eng-web/data-bank.html#ngpl-1
22 https://fci.gov.in/storages.php?view=35
23 C
other public entities such as Indian Railways are not included
24 MinisAsset Monetisation— Framework and Instruments
12Volume I: Monetisation Guidebook is now a need to systematically adopt these initiatives across varied asset classes and
streamline the frameworks and modalities of such alternatives in a manner which can be
readily absorbed, evaluated and replicated.
Figure 8: Asset Monetisation Eco-System and Benefits to Stakeholders
2.2.1 Framework features
The framework for monetisation of core assets has three key imperatives.
Figure 9: Framework features for Core Asset Monetisation
aSelection of de-risked and brownfield assets with stable revenue generation profile (or long-term revenue rights) that can be clearly ring-fenced, is of critical importance.
aTransaction should be structured around revenue rights as against transfer of full ownership. Towards this, hand back of assets to the original asset owner at the end of transaction life is a key requirement.
13Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook
aMonetisation should be viewed as structured contractual partnerships and not
privatization or slump sale of assets. Well-defined contractual frameworks should
be adopted which allow government authorities to have clearly laid down KPIs
(Key Performance Indicators) and standards for assets.
aSelection of private partner should be through a transparent mechanism and the utilization of proceeds received should be towards well-defined uses such as new infrastructure creation etc.
2.2.2 Considerations for contractual structuring
Infrastructure assets entail a clear need for the government to retain a degree of oversight and control by way of either contractual mechanisms or regulations. This is because the projects around these assets typically involve
25
:
i. Transfer of public assets including land;
ii. Delegation of governmental authority to collect and appropriate user charges that are levied by force of law and must therefore be ‘reasonable’; Protection of user interests and the need to secure value for public money
iii.
Provision of services to users in a monopoly or semi-monopoly situation, which imposes a special obligation on the government to ensure adequate service quality; and
iv.
Sharing of risks and contingent liabilities by the government, as applicable.
Because of such pre-requisites and nature of risks, as also involvement of multiple parties – including project sponsors, lenders, government entities, public users and regulatory authorities etc – monetisation of infrastructure assets can be complex. This mandates detailed due diligence, legal and contractual agreements that clearly set forth the risks, rewards and obligations of various participants.
Monetisation of infrastructure assets should hence be structured with a careful consideration to protection of user interests and maximization of value to the public authority (similar to that in case of Public Private Partnerships projects).
2.3 MONETISATION MODELS
Asset Monetisation can be undertaken through a range of instruments/ tools. This section summarizes some of the few models, which have been utilized and have proven to be effective in monetising brownfield assets.
26
Monetisation models which are currently being
explored/ availed may broadly be categorized into two approaches: (i) Direct Contractual Approach and (ii) Structured Financing models.
25 F
Projects
26 Models, included herein, are only some of the structures adopted/ with potential for adoption; The list is
not comprehensive and will vary based on the features of the assets and the expectations of authority,
investors and users. Asset Monetisation— Framework and Instruments
14Volume I: Monetisation Guidebook ‘Direct Contractual’
Approach
Structured financing
models
Concession/ contract
between a public entity and
identified private sector
developer(s)/ investor(s)
Structured instruments for
long-term fund generation
via capital markets or
through a pool of investors
Figure 10: Core Asset Monetisation approaches
The aforementioned classification has solely been used, for the purpose of this Guidebook,
to delineate the broad principles under various models/ structures. This is only one of the
possible and indicative way to classify monetisation models and is not to be treated as
prescribed/ formal categorization of monetisation models.
In practical application, adoption of one or the other category of models would depend
upon various factors viz. asset profile, objectives for monetisation, expectations of sponsor
and investors etc. The most optimal or selected model, could hence very well be one
of the above or a hybrid structure (having features of both of the above categories) or
possibly an entirely different model.
Table 2:
Indicative features of Direct Contractual mode
Transaction
Asset OR rights over such asset–Transferred to a single or a consortium of
developers and / or investors, by way of defined contractual frameworks
Consideration Upfront and/or periodic payments
Target Investor
Class
Generally, infrastructure developers, strategic investors with direct
involvement / oversight in operations
Selection modes
Through a competitive bidding process and as per prescribed guidelines
of Government
Contractual
aspects
Key performance indicators and clearly defined performance regime with
commensurate incentive or penalty mechanisms, suitable exit provisions,
termination and force majeure provisions
Prevalent
Structures
PPP concessions
Table 3:
Indicative features of Structured Financing Instruments
Transaction
Partnership interest in the asset OR rights over such assets, granted to a
pool of investors (under a capital market based instrument or otherwise)
Consideration Generally Upfront
Target Investor
Class
— Ins
insurance funds, pension funds
— Retail investors
Selection modes Public listing or private placement or other such mechanisms
Prevalent
Structures
Infrastructure Investment Trust (InvIT), Real Estate Investment Trust (REIT),
Asset-back securitisation (ABS) Asset Monetisation— Framework and Instruments
15Volume I: Monetisation Guidebook 2.4 DIRECT CONTRACTUAL MODELS – BROWNFIELD PPP
CONCESSIONS
In the past, brownfield models have largely been focussed as management contracts –
where the obligation to provide service remains with the public authority, but the day-
to-day management of the asset is vested with the private sector. These are contractual
arrangements, with duration of typically 3-5 years – where the private sector entity is
responsible for the O&M of a part or the whole of the asset/ facility or service.
Brownfield PPP models, on the other hand, aim at roping in private sector partner for end-
to-end operation and maintenance (O&M), provision of service to users and augmentation
of asset as necessary. Various potential models for such brownfield PPP of existing
infrastructure assets owned by public sector entities/line ministries/ statutory authorities
include:
Operate Maintain Transfer (OMT) Operate Maintain Develop (OMD)
Brownfield Public Private Partnership Concessions
Toll Operate Transfer (TOT)
in Roads
Operation Management
Development Agreement
(OMDA) in Airports
Model
Adopted as
Figure 11: Brownfield PPP Models
2.4.1 Operate–Maintain-Transfer Concession
The fundamental principle under the model is to engage private sector partner for undertaking operations and maintenance of projects. This presupposes that construction works have been completed by the asset owner/ government and the project is amenable to immediate revenue collection. As the existing project has established demand/ traffic revenue streams the project structure does not suffer from volatility or unmanageable commercial risks.
From the perspective of bidders, hence, the future revenue potential can be assessed
with a fair degree of certainty. Which enables the asset owner to be able to monetise the
project for an upfront/ periodic consideration (in form of premium/ revenue share). This
not just ensures cash inflows to the public asset owner, but also relieves it of the financial
and capacity commitments towards operations and maintenance of the project, thereby
reducing expenditure or budgetary support requirement. This is necessary for financial
and operational bandwidth to public entities for implementation of greenfield projects,
as also higher commercial and operational efficiency.
OMT contracts have seen strong impetus in road sector in India. OMT contracts are a
combination of a tolling contract and a contract for operations & maintenance. Between Asset Monetisation— Framework and Instruments
16Volume I: Monetisation Guidebook 2009-10 and 2014-15, NHAI has awarded a total of around 2,400 km of National Highways
to be maintained on OMT basis.
27
Figure 12: OMT Broad Structure
Table 4: Key Terms of an OMT Concession
Key Requirement
Operational asset, preferably with one complete cycle/ year of
operations
Potential Projects
Projects newly constructed and commissioned by the public asset
owner through its own funds (EPC etc.) OR
Project originally tendered out through PPP modes and for which have
concession period is complete or termination has occurred
28

Primary
Obligations
— Oper
— Pr
market-based fee;
Concession Period
10 years or more, however, depending on the asset category.
Longer concession periods with pre-defined terms of augmentation
preferable
29
Consideration
Upfront or Annual Premium (Fixed OR in form of revenue share)
Variation of model where an upfront value is bid and paid by
Concessionaire is TOT
30
Investor Class
Strategic investors or Infrastructure developer with direct involvement /
oversight in operations
Selection
Through competitive bidding process and as per prescribed guidelines
of Government
Other Terms Standard terms as in case of PPP Projects
27 CRISIL r
28 Subject to asset being suitable for operations and resolution of ensuing legal conflict (if any)
29 Major augmentation or development obligations are usually not covered under these Projects. If, however,
required, at a later stage the same may be under EPC mode and funded by the Authority. In case the
same is pre-specified and is to be funded by the concessionaire, present value of such expenditure will
be reduced from the upfront consideration to the Authority.
30
TAsset Monetisation— Framework and Instruments
17Volume I: Monetisation Guidebook 2.4.1.1 Toll Operate Transfer
Toll Operate Transfer (TOT) is a variant of the OMT model, recently adopted in roads
sector, where consideration paid to the Authority is in form of an upfront premium. This
is one of the key models for monetisation successfully employed in the roads sector in
India both by Central and State entities. Ministry of Road Transport and Highways (MoRTH)
introduced the TOT concession framework in 2016 for monetisation of road assets portfolio
by National Highways Authority of India (NHAI) to long-term investors.
Toll Operate Transfer (TOT) Model
Ensures efficient management of public funded and operational national highway projects through structured contractual partnerships with defined KPIs and O&M standards
Provides upfront proceeds for ploughing back into greenfield national
highway development
The TOT model primarily entails securitization of the toll receivables by collecting an
upfront concession fee from the selected bidder and determined through a transparent
competitive bidding mechanism. The structure involves leasing out of operational national
highways (NHs) (ideally constructed under the EPC model) with consideration paid upfront.
The road assets are awarded to winning bidders who are granted concession to collect
toll and to maintain the roads over the life of the concession which is 15-30 years. The
structure also provides for toll rate escalations linked to inflation.
Till date, five rounds of TOT have been undertaken covering a stretch of 2395 km, out of
which 3 rounds have been completed – Bundle 1, Bundle 3 and Bundle 5. NHAI has raised
~Rs. 17,000 crores across these three rounds of TOT entailing toll road assets of ~1400 km.
Table 5:
TOT bundles bid out by NHAI till date
S.No BundleDateLengthValue
1 TOT Bundle 1 Aug 2018682 kmRs. 9,681 crores
2 TOT Bundle 2 Feb 2019586 kmBid cancelled
3 TOT Bundle 3 Nov 2019566 kmRs. 5,011 crores
4 TOT Bundle 4 Sep 2020401 km Bid cancelled
5 TOT Bundle 5A-1 Jan 202154 kmRs. 1,011 crores
31

6 TOT Bundle 5A-2 Jan 2021106 kmRs. 1,251 crores
24
Certain state government entities have also adopted the TOT model for monetising state
toll roads.
31 Bids undertaken with undisclosed IECVAsset Monetisation— Framework and Instruments
18Volume I: Monetisation Guidebook In June 2020, Maharashtra State Road
Development Corporation (MSRDC)
awarded the tolling rights of Mumbai
Pune Expressway and old Mumbai-Pune
corridor (NH-48) to IRB Infrastructure
Developers for a total consideration
of Rs 8,262 crore comprising upfront
payment of Rs 6,500 crore and the
balance in staggered instalments over
a period of three years.
CASE STUDY – TOT BUNDLE 1
The first TOT model was bid out in 2018, and comprised nine highway stretches aggregating to ~682 km in Andhra Pradesh and Gujarat, ensuring geographic diversification. Six of these were in AP and are part of the NH-5 of the Golden Quadrilateral connecting Kolkata and Chennai. They had a strong traffic potential given the presence of ports, industrial clusters and consumption centres in the project vicinity.
TOT-1 toll roads had a higher share of commercial traffic at 85% vis-à-vis corresponding
national average of 75%. As against NHAI’s Initial Estimated Concession Value (IECV)
of Rs 6,258 crore, the winning bid was of Rs 9,682 crore. NHAI utilised the monetised
proceeds for funding new road projects under Bharatmala program thus diversifying
its conventional funding sources.
Key takeaways
A. Diversified asset mix, quality of underlying road assets and tenor of the
concession period are vital to attract investor interest
The location of the projects i.e. Andhra Pradesh and Gujarat, along with the overall project influence area, and potential traffic growth played a key role in getting a winning bid equal to almost 1.5 times the reserve price. Other contributing factors included long concession period of 30 years, transparency in availability of historical traffic data of project roads.Asset Monetisation— Framework and Instruments
19Volume I: Monetisation Guidebook B. Adequate project preparation and key changes in the regulatory framework
have enhanced investor appetite
Detailed study and consultation were undertaken prior to structuring and rolling out the
first TOT transaction by NHAI. Also, before awarding the bundle of projects, authority
had conducted robust due diligence of the bundled projects through drone videos
and network survey vehicles for ascertaining asset condition of underlying road assets
along with current traffic patterns
2.4.2 Operate–Maintain-Develop Concession
Under the Operate Maintain and Develop structure, an asset which is operational but due
for augmentation is handed over to the private party for augmentation and O&M over
the concession period. Usually, the operations of such asset remain uninterrupted with
augmentation undertaken while the asset is operational.
The private sector raises finance on the strength of the existing assets and / or obtains
project financing along with equity contribution for undertaking such augmentation. The
private sector pays an upfront or an annual consideration (in form of a premium and / or
revenue share) and earns its returns through revenues from upgraded asset.
Figure 13: OMD Structure
Table 6: Key Terms of an OMD Concession
Key Requirement Operational asset which is due for augmentation
Potential Projects
Projects constructed and completed by public asset owner through
their own funds OR
Project originally tendered out through PPP modes and for which
concession period is complete
32
Primary Obligations
— 
A
Maintenance of assets;
— Pr
market-based fee;
32 T
conflict (if any)Asset Monetisation— Framework and Instruments
20Volume I: Monetisation Guidebook Concession Period 25 years or more, however, depending on the asset category.
Consideration
Annual Premium (Fixed or in form of revenue share)
And/ OR Upfront Premium
33
Investor Class Strategic investors with direct or active involvement in operations
Selection
Through a competitive bidding process and as per prescribed
guidelines of Government
Other Terms Standard terms as in case of PPP Projects
A similar structure is the Rehabilitate-Operate-Maintain-Transfer (ROMT) where an existing
asset ideally needs to be first upgraded/augmented before the operations and collection
of the revenue can be resumed. Here as well, the concession terms are generally similar to
OMD contracts with consideration for netting off the cost of rehabilitation to the Authority.
CASE STUDY: OMDA IN AIRPORT SECTOR
The development of airports through PPP mode started in 2006 with the Airports Authority of India (AAI) airports at Delhi and Mumbai. The contracts were structured as Operation, Management and Development Agreement which have helped create a world class airport infrastructure.
AAI tendered out the concession of Delhi
International Airport for augmentation
& O&M with revenue share as the bid
parameter. In order to enhance the
commercial attractiveness and viability
of the project, city side real estate has
been clubbed along with. The concession
period is 30 years (renewal after 30
years) with transfer at end of period.
The Project has been completed at a
total cost of Rs 12,500 crore enabling
augmentation and long-term operation
of airport with no additional cost to AAI.
33 As c
of six airports (2019) or be bid parameter (with pre-defined revenue share) Asset Monetisation— Framework and Instruments
21Volume I: Monetisation Guidebook Leasing of Six Airports (2019)
Airports Authority of India (AAI) undertook development of 6 brownfield airports–
Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangalore–under
PPP mode in 2019.
The scope of work for the concessionaire entailed capacity expansion of the airports
in a phased manner along with ongoing and future O&M. It also included development,
operation and maintenance of city-side (creating infrastructure facilities adjacent to
airports like hotels, restaurants, retail shops, etc.)
34
. The concession period of these
airports was 50 years with no extension provision. Thereafter, the assets will be
handed back to the Authority i.e. AAI. The concession also envisaged a State Support
Agreement with respective state governments. The State Support Agreement is aimed
at enabling support related to removing encroachments, security and protection of
property, clearance, and utilities (like power, water supply services).
The bid parameter for the project was ‘Per Passenger Fee’ with the concessionaire
required to pay monthly fee equivalent to the aggregate of domestic user fee (product
of per passenger fee for domestic passenger and domestic passenger throughput) and
international user fee (product of per passenger fee for international passenger
35
and
international passenger throughput).
Various funds and strategic investors participated in the bid. The financial bids of the
qualified bidders for Project were opened in February 2019. The bid process enabled
receipt of approximately Rs 900 crore upfront to AAI with no expenditure and capacity
commitment over the next 50 years.
36
2.4.3 Other PPP models
The critical factor that defines an “asset monetisation” is the nature of the asset. If the underlying asset is an active revenue generating asset with potential for utilization in a manner which ensures higher accruals / grant savings to the authority then it may be considered under the category of asset monetisation.
A key example is the proposed private participation initiatives in railways where the railway
station redevelopment projects (Design Build Finance Operate Transfer) are being rolled
34 T
35 T
36 AAsset Monetisation— Framework and Instruments
22Volume I: Monetisation Guidebook out leveraging the existing infrastructure available with railways viz. track, signalling,
stations etc. Such assets, on account of their brownfield nature and/ or existing traffic,
allow reduced upfront investment for the concessionaire (in certain cases revenue potential
from day one) thereby ensuring higher viability. This, in turn results in higher upfront or
periodic consideration to the authority or saving of viability grant. Since such enhanced
value/ accruals to authority is reflective of the value of capital invested in the existing
asset, such transactions are considered under the asset monetisation framework.
2.5 LONG TERM LEASE
A lease is an agreement whereby the lessor confers to the lessee the right to use an asset
for an agreed period of time in return for a payment or series of payments.
While principally akin to brownfield PPP models, the primary difference in case of long-
term lease models lies in the nature of assets leased out and/or use of such assets. Long
term lease models can be adopted in case of sectors such as telecom etc. where the
license to provide an infrastructure service is already available with a private party and
the unused/sub-optimally utilised asset of public sector entity is leased out to the such
private sector party for providing service under its own license. Alternatively, such models
can be adopted in cases where an infrastructure asset viz. mine etc. is allowed for captive
usage by private sector players.
Such models can also be used for achieving asset light balance sheets or for innovative
financing
37
by public sector entities. Where the infrastructure asset or right to operate,
such assets are transferred to a private sector entity for a pre-determined period in lieu
of an upfront consideration. The public sector entity then uses such assets for providing
service to public against periodic payments. Such leases are executed on long-term basis
usually in lieu of a fixed upfront consideration or fixed periodic consideration with annual
escalation.
Long term Lease models may also be employed for urban land based assets such as
hospitality assets or bus terminals. At times, this model may also be applied in combination
with other PPP models such as Rehabilitate-Operate-Maintain–Transfer (ROMT). In such
cases, however, the contract period may be longer, and the private sector may be required
to make additional investments. The asset transfer under such a lease agreement may
happen with or without restrictions on function or usage.
Scenarios
A. Assets of public entity leased out for providing service under its own
license
Right/ License to provide an infrastructure service already available with a private party;
B.
Leasing of assets for Captive Use
C. Leasing for achieving asset light balance sheets
Figure 14: Long term Lease Models
37 Similar tAsset Monetisation— Framework and Instruments
23Volume I: Monetisation Guidebook Table 7: Key Features of Lease
Lease Period 10 years or more, however, depending on the asset category.
Consideration
Fixed upfront consideration OR
Annual payments with escalation
Investor Class
Existing Licensees (Scenario A); Captive Users (Scenario B) Financial
investors (Scenario C)
Potential Sectors Power, Telecom, Pipeline, Ports, Mining etc.
Benefits of such leasing transaction to the public sector entity include upfront consideration
against unused or sub-optimally utilised assets along with no liability towards regular
maintenance. While for private sector it is largely the availability of an operational asset
without any construction risks and faster roll-out of services.
Leasing – Tower assets in Telecom sector
Contracts between tower infrastructure companies and telecom operators (tenants), which clearly spell out the overall tower requirements of the tenants, the pricing terms, and other binding terms and conditions between the two parties. It is generally referred to as passive infrastructure sharing and includes elements like tower space for mounting antennas for a BTS and also associated passive equipment. BSNL and MTNL have been renting out towers and mobile sites, respectively, to private players against rentals.
2.6 INFRASTRUCTURE INVESTMENT TRUST
Infrastructure Investment Trust (InvIT) is an innovative trust-based financial instrument, which enables participation in infrastructure financing through a stable and liquid instrument. InvITs provide an opportunity to invest in infrastructure assets with predictable cash flows and dividends. InvITs have been introduced in India in 2014 and are employed by infrastructure asset owners to pool in money from a diverse set of investors against pay-out of cash flow generated by the assets on a periodic basis.
Under an InvIT transaction, infrastructure asset owners transfer multiple revenue generating
asset
38
SPVs through holdco or otherwise to a trust which then issues units to investors for
raising money. The upfront money so raised is utilized by the developers for creation of
new greenfield assets as also for repayment of debt which enables availability of capital
with lenders for investment/ lending to new projects. The investors, in lieu of invested
money, receive a share of Net Distributable Cash Flows (NDCF – similar to the dividend
pay-outs) on a periodic basis, commensurate with their unit holding in the Trust. Improved
yields for the unit holders can be insured, by adding revenue-generating projects and
expanding its portfolio.
The structure of a typical InvIT transaction and the fund flow across agencies is represented
in the figure below.
38 PAsset Monetisation— Framework and Instruments
24Volume I: Monetisation Guidebook Figure 15: InvIT transaction – Illustrative structure
2.6.1 Key stakeholders
Under this structure, the public asset owner (‘Sponsor’) creates an independent trust and
transfers the ownership/ rights of the public assets to the same. Investors (‘Unit Holders’)
are the beneficiaries
39
of the trust.
The key stakeholders under the InvIT structure include:
aThe Sponsor – The sponsor is the public asset owner (for public-owned assets) which sets up the InvIT with the objective to monetise its assets. In case of PPP projects, the sponsor is the infrastructure developer or a SPV holding the concession agreement.
aThe Trustee – The trustee means a person who holds the InvIT assets in trust for the benefit of the unit holders, in accordance with extant regulations.
aThe Unit holders – The unit holders are the investors who subscribe to the units
of the InvIT. The unit holders are the eventual beneficiaries of the asset.
aThe Investment manager – The investment manager is responsible for taking
investment decisions in the interest of unit holders including addition of new assets / sale of existing assets, leverage etc.
aThe Project Manager – The project manager brings in the operational expertise
of managing the infrastructure assets as per the interest of the unit holders.
Other key stakeholders incidental to the InvIT registration and issuance process include valuer, auditor(s), merchant banker(s), registrar & transfer agent, banks, registrar to the issue, credit rating agencies, and depository participants.
39 As per the Indian Trust Act, 1882 – the person for whose benefit the confidence is accepted is called the
“beneficiary”Asset Monetisation— Framework and Instruments
25Volume I: Monetisation Guidebook Table 8: Key Requirements/ Terms of an InvIT
Key
Requirement
— Oper
for Public InvIT
40
— 
Eligible sub-sectors as per Harmonised Master list of infrastructure sub-
sectors of MoF
Types of InvIT
Public
41
Open for participation by all kinds of investors including retail; and
Private: Restricted for participation by Qualified Institutional Buyers and
bodies corporate
Minimum Value Assets under InvIT: Rs. 500 crores (Initial offer size: At least Rs 250 crore)
Consideration Upfront Consideration against subscription of InvIT units
Investor Class
Financial investors looking for stable yields; sovereign wealth funds and
global pension funds, insurance funds, retail investors etc.
Investor
Payment
Not less than 90% of the net distributable cash flows of the InvIT
distributed to unit holders
Figure 16: Key Benefits of InvIT
InvITs – Similar instruments globally
42

Globally private institutional funds have complemented debt funds in financing
infrastructure investment. There has been a global consensus on the potential for
tapping large institutional investors (including pension funds, sovereign wealth funds
etc.) as well as retail investors towards infrastructure asset class, especially with lower-
risk levels (brownfield assets). Two specific instruments seen in the USA which have
been fairly successful in tapping institutional investors into infrastructure assets are:
Yieldcos and Master Limited Partnerships (MLPs).
40 P
assets, subject to compliance with SEBI regulations may be considered
41 Minimum number of investors is 20; If number of participants is more than 1000, then automatically
public issue
42 T
Sean T. Wheeler Latham & Watkins MLP PracticeAsset Monetisation— Framework and Instruments
26Volume I: Monetisation Guidebook 2.6.2 InvIT Process
InvITs are established are trusts under the Indian Trust Act, 1882 and regulated under
the SEBI (Infrastructure Investment Trusts) Regulations, 2014. Detailed regulations are
discussed in Section 6.
The steps in a typical InvIT transaction are represented in the figure below.
Figure 17: InvIT transaction – Illustrative steps
2.6.3 InvIT transactions in India
India has seen a number of InvIT transactions over the last 4-5 years. The total Assets
Under Management (AUM) across the 8 active InvITs
43
is around Rs. ~1.4 lakh crore. Bulk of
the assets are under toll roads (rs. 47,500 crore), followed by telecom (rs. 42,000 crore),
gas pipeline (rs. 16,500 crore) and power transmission (rs. 14,000 crore).
Since the introduction of InvIT regulations, bulk of the InvIT’s have been sponsored by
private sector infrastructure developers. Recently, public sector asset owners such as
Powergrid and NHAI have initiated greater adoption of the instrument. The table below
provides the list of InvIT transactions since its introduction
Table 9:
Key InvIT transactions
S.No.InvITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
1 IRB InvIT Fund – IRB
Infrastructure Developers
Toll roads PublicMay 20176,500
2 India Grid Trust of Sterlite
Power
Transmission Public June
201715,000
43 ExAsset Monetisation— Framework and Instruments
27Volume I: Monetisation Guidebook S.No.InvITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
3 IndInfravit Trust – L&T IDPL Roads Private June
201810,500
4 India Infrastructure Trust –
Brookfield
Gas pipeline Private March
201914,500
5 Oriental Infra Trust – Oriental
Structural Engineering Pvt. Ltd.
Toll roads Private June
201911,000
6 IRB Infrastructure Trust Toll roads Private Feb
202022,500
7 Tower infrastructure Trust –
Reliance & Brookfield
Telecom
towers
Private Sep
202042,000
8 Digital Fibre Infrastructure Trust Fibre Optic Private Oct
2020
1,500
9 Powergrid InvITPower
Transmission
PublicMay 2021 7,800
The first InvIT of a public sector entity, PowerGrid has been recently launched in the
market. The issue has monetised assets worth ~Rs 7,800 crore and Powergrid has divested
85% of its unit holding in the InvIT. The issue has been listed at premium. National Highways
Authority of India is also in advanced stage of raising funds through an InvIT issue expected
shortly.
CASE STUDY – INDIGRID INVIT
44
IndiGrid InvIT was established in October 2016 by Sterlite Power Grid Ventures Ltd (SPGVL) to monetise two transmission assets – Bhopal Dhule Transmission Company Limited (BDTCL) and Jabalpur Transmission Company Limited (JTCL). The assets have established long term contracts, with low operating risks and stable cashflows.
IndiGrid raised around Rs. 1,012 crores from 19 anchor investors. This helped improve
retail participation in the InvIT and also ensured stable price levels.
44 InfAsset Monetisation— Framework and Instruments
28Volume I: Monetisation Guidebook Key takeaways
a. Diversified Asset Mix: The Trust has a diversified asset portfolio comprising 12
inter-state transmission assets across 15 states and 1 Union Territory. These assets
have an availability-based payment mechanism, with a credible counterparty –
PGCIL with average availability of greater than 99.5% (from COD till Dec 31, 2020).
b.
Addition of assets: Starting with 2 project assets with an AUM of Rs. ~3,700
crores in 2017, the InvIT currently holds around 15 project assets with an aggregate AUM of Rs. ~15,000 crores as of Q3 2021. The increase in asset portfolio over time has ensured greater market interest and improved liquidity of InvIT. Active role of Investor and co-sponsor, KKR in management and Governance of InvIT and investment decisions has played a critical in growth journey of the InvIT and value appreciation.
c.
Distribution per Unit (DPU) and Distribution yield over the period from FY 2018 to FY 2020 for InvIT is as shown below
2.7 REAL ESTATE INVESTMENT TRUST
Real estate assets are capital-intensive assets which require substantial up-fronting of investments by the developer. While the land and building based debt products have been available, this does not provide for effective risk-sharing and cost-effective financing for the developer. Real Estate Investment Trusts (REIT) are similar in structure to InvITs. As against InvIT which is unique to the Indian context, REIT structures have seen traction across the globe. The REIT’s origin dates back to the 1960s in US. The objective of the REIT structure is to broad-base options for the developers towards expanding the sources of funds.
Only real estate projects
45
are eligible under this structure. The regulations also stipulate
that 51% of the consolidated revenues of the REIT, holding company and SPV, should arise
45 “R
leasehold or freehold and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car
parks, etc. and any other assets incidental to the ownership of real estate but does not include mortgage.Asset Monetisation— Framework and Instruments
29Volume I: Monetisation Guidebook from rental, leasing and letting real estate assets or any other income incidental to the
leasing of such assets. However, exceptions have been made with respect to (i) hotels,
hospitals and convention centres forming part of composite real estate projects, whether
rent generating or income generating; and (ii) common infrastructure for composite real
estate projects, industrial parks and SEZs.
The structure of a typical REIT transaction and the fund flow across agencies is represented
in the figure below.
Sponsors
TrusteeREIT
Unit Holders
Real estate assests
Unit holders’ cashflow to REIT
Funds infused at the time of issue
REIT’ cashflow to unit holders
•  Divided
•  Interest on REIT loans
•  Capital repayment/buyback of 
units
REIT’ cashflow to unit SPVs•  REIT loans for SPV loan 
prepayment
•  Meeting SPVs’other cash 
requirements - reserve creation, 
etc.
SPVs’ cashflow to REIT 
•  Dividdend
•  Interest on REIT loans
•  Repayment of REIT loans
•  Share buyback of SPVs
SPVSPV(V)
Holdco
Manager
Figure 18: REIT transaction – Illustrative structure
Real Estate (Regulation and Development) Act has brought in sizeable level of accountability
and transparency in the segment. In this context, REIT structure has been able to provide
an effective and robust corporate governance framework with clearly delineated roles and
responsibilities for key stakeholders such as sponsor, investment manager, etc. and the
transparency on the revenue/ rent collections.
Table 10:
Key Requirements/ Terms of an REIT
Key Requirement
Revenues arise from rental, leasing and letting real estate assets or
any other income incidental to the leasing of such assets
Mandatory Listing
Types of InvIT Public (Open for participation by all kinds of investors including retail)
Consideration Upfront Consideration against subscription of REIT units
Investor Class
Financial investors looking for stable yields; sovereign wealth funds and global pension funds, insurance funds, retail investors etc.
Investor Payment
Not less than 90% of the net distributable cash flows of the REIT distributed to unit holdersAsset Monetisation— Framework and Instruments
30Volume I: Monetisation Guidebook Potential Assets
Railway warehouses/ good sheds
Multifunctional complexes
City-side development for Airports
Commercial development on Municipal land
Commercial development along the toll road stretches
Railway stations’ commercial development etc.
Public sector entities in India sit on an inventory of under-utilised land assets in some
of the high value real estate zones, which may be freehold land or underutilised land
parcels. The REIT platform provides an opportunity to capture value from these assets
by allowing commercial development. The instrument provides an opportunity for real
estate asset owners to raise money upfront by transferring the revenue generating real
estate assets to the trust. The investors receive the net distributable cash flows generated
by the infrastructure assets.
Figure 19: Benefits and Limitations of REIT
REITs are established as trusts under the Indian Trust Act, 1882 and regulated under the SEBI (Real Estate Investment Trusts) Regulations, 2014. Detailed regulations are discussed in Section 6.
Issuance process of a REIT is similar to an InvIT and is discussed in detail in Section 6.
REITs – Similar instruments globally
REITs have been active infrastructure instruments for real estate financing globally.
They started in the USA in the early 1960s and currently is present across 40 countries
across the world. REITs globally invest in the majority of real estate property types,
including offices, apartment buildings, warehouses, retail centres, medical facilities,
data centres, cell towers, infrastructure and hotels.Asset Monetisation— Framework and Instruments
31Volume I: Monetisation Guidebook List of countries with REITs and the year of adoption
46
Snapshot of the US REIT market:
It is estimated that there are more than 1100 REITs in US
47
, out of which 225 REITs
are public REITs registered with the SEC. As of December 2019, REITs in the US own
more than $3.5 trillion of gross real estate assets and 5.16 lakh properties
48
. REITs may
also be categorized as public REIT (in case of shares registered with Securities and
Exchange Commission) or private REITs.
REITs in US can be categorized based on nature of risk exposure to the underlying
asset as follows: Equity REITs and Mortgage REITs (mREITs). Equity REITs own and
operate real estate assets while the mREITs invest in mortgages and mortgage-
backed securities, providing financing for residential and commercial properties. REITs
performance have largely been better than the overall stock market performance.
The market capitalization of REITs (and number of publicly traded REITs in bracket)
in select countries is as follows
49
:
JurisdictionValueNumber
United StatesUS$ 1232 billion194
SingaporeUS$ 76 billion44
JapanUS$ 148 billion62
Hong KongUS$ 35 billion11
IndiaUS$ 4 billion1
MalaysiaUS$ 9 billion18
46 https://www.reit.com/investing/global-real-estate-investment
47 Based on tax return filings by Internal Revenue Service;
48 Only public REITs
49 https://www.crisil.com/content/dam/crisil/our-analysis/reports/Ratings/documents/2019/october/
indias-reit-opportunity.PDF (Aug, 2019)Asset Monetisation— Framework and Instruments
32Volume I: Monetisation Guidebook 2.7.1 REIT transactions in India
India has seen 3 REIT transactions since the regulations were introduced. The transactions
have been largely in the private sector space. With a significant inventory of real estate
assets with strong development potential, REITs can play a major role in transforming
public sector financing landscape. The table below provides the list of REIT transactions
since its introduction.
Table 11:
REIT transactions in India
S.No. REITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
1 Embassy REITOffice parks Public April 2019 33,000
2 Mindspace REIT Office parks Public Aug 2020 22,500
3 Brookfield India REIT Office parks Public Feb 202111,000
Total66,500
CASE STUDY – MINDSPACE REIT
50
Mindspace REIT was established on November 18, 2019. The REIT holds 10 real estate
assets through 8 SPVs. Mindspace Business Parks REIT owns office portfolio located
in four key office markets of India – Mumbai (41%), Hyderabad (39%), Pune (17%) and
Chennai (3%). Portfolio has total leasable area of 29.5 million square feet (msf) and is
one of the largest grade-A office portfolios in India. Portfolio comprises 23.0 msf of
completed area, 2.8 msf of under construction area and 3.6 msf of future dvelopment
area, as of March 31, 2020.
Key takeaways
1. Counterparty profile for the REIT assets
The tenants are largely MNC firms from diversified sectors which helped bring in better realisations and lower volatility of cashflows. The average rent for the assets was around Rs. 60 per sq. ft. per month. Hence, the selection of the assets for REIT needs to be backed by adequate assessment of counterparty risks that the REIT assets might get exposed to and also needs to be backed by risk mitigation measures to ensure investor comfort.
50 InfAsset Monetisation— Framework and Instruments
33Volume I: Monetisation Guidebook Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2. Anchor investors and strategic investors during public issue;
Presence of an experienced real estate player i.e Blackstone group in this case, with
experience in managing similar assets can potentially bring in large-scale investors like
pension funds, insurance funds etc.
2.8 FACTORS DETERMINING CHOICE OF MODEL
The key decision-making criteria for monetisation include:
i.
Extent of fund raised and potential for upfront receipt for the public sector agency
ii.
Tax efficiency and liquidity for investors and target investor class
iii. Operational control for the public sector agency
iv. Valuation potential
It is seen that the capital market instruments have the potential to bring in better value considerations, while the PPP concession may be suitable in sectors where the private sector brings in improved standards for operation and maintenance with service to users under a defined framework.
34 3
Asset Monetisation
Experience: India
and Beyond
The section delves into the Asset
Monetisation experience, globally
and in India, its key features,
guiding frameworks,
factors for success
and case studies
Asset Monetisation Experience: India and Beyond 35 Infrastructure investment requirement, globally, has been estimated at USD 94 trillion
during the period 2016 to 2040
51
. Of which, ~50% alone is required in Asia (with China,
India and Japan being major contributors). While governments lead the initiative of
meeting the massive infrastructure deficit, it is widely accepted that governments alone
cannot fund this level of infrastructure investment requirement. In order to bridge this
infrastructure deficit, globally public sector has explored various options including, but not
limited to public funding, private partnerships/ private finance initiatives, value capture,
debt financing and public asset recycling.
Asset recycling is considered as an alternative strategy where there is a considerable public
asset base–comprising of mature brownfield or surplus or under-utilized assets–which is
leveraged for raising upfront capital for investment in new assets or for revitalization of
existing assets. Asset recycling is being increasingly recognized as a means of alleviating
budget pressure and delivering new infrastructure and services.
It simultaneously enables private sector investors avoid risks associated with the construction
phase. There is already an established track record of investment by institutional investors
and funds in mature economic infrastructure projects such as toll roads, ports and airports
in North America, Europe and Australia. More recently, such investments have been seen
in Asia-Pacific region as well.
3.1 AUSTRALIA’S ASSET RECYCLING INITIATIVE (ARI)
The concept of asset recycling has been widely implemented in Australia through the
Asset Recycling Initiative (ARI) of the federal government.
3.1.1 Need for Asset Recycling in Australia
Australian federal government in the year 2013, directed the Productivity Commission (PC)
to commence a thorough examination of infrastructure costs and financing in Australia with
focus on ways to improve decision-making and implementation processes. The objective
was to facilitate cost reduction in public infrastructure projects and recommendations
on policy measures including any non-legislative approaches, which would help ensure
effective delivery of infrastructure services over both the short and long term.
The PC findings reported an increasing caution by private investors about investing in
public infrastructure projects owing to factors such as long drawn procurement processes
with ‘patchy’ deal flow. At the same time, owing to a federal structure, it is the states and
local governments that had much of the planning, environmental and regulatory controls.
In this backdrop, the government, during the 2014-15 budget, announced the Infrastructure
Growth Package (IGP) which was s a ten-year vision of infrastructure investment in the
country. IGP comprised of three key components, the Asset Recycling Initiative, new
investments, and the Western Sydney Infrastructure Plan. The Asset Recycling Initiative
(ARI, 2014) which was aimed at encouraging states to recycle assets and utilise the
sale proceeds into new productivity-enhancing infrastructure by encouraging private
companies to fund and run public infrastructure.
51 Global Infrastructure Outlook 2017 published by Oxford EconomicsAsset Monetisation Experience: India and Beyond
36Volume I: Monetisation Guidebook 3.1.2 Key features of Asset Recycling Initiative (ARI)
The ARI provided monetary incentive for states to engage in asset recycling to boost
infrastructure development. It envisaged a sum of 15 percent of the estimated proceeds
from monetisation of an asset (through sale or lease) to be paid to a state by the federal
government if the proceeds are reinvested in new infrastructure. The ARI was designed as
a five-year program from 2014- 2019, and the funding was allocated to specific proposals
on a first-come, first-serve basis.
States, in agreement with the federal government, decided on the specific assets to
be monetised and on the additional infrastructure that money will be recycled into.
The initiative also envisaged a definite timeline for completion of sale of the asset and
commencement of construction of the additional infrastructure. The federal government’s
financial contribution was managed through the Asset Recycling Fund (ARF), which was
used to make payments to states under the IGP.
Figure 20: Illustrative ARI process
3.1.3 Assets covered under ARI and Investor response
Overall, three of Australia’s eight states and territories participated in the scheme. By 2018, 12 major public assets were rolled out under ARI across New South Wales, Victoria, the Northern Territory, South Australia and the Australian Capital Territory. Approximately, AUD 3 billion in incentive payments were paid to participating states and territories over the life of the scheme. This helped in unlocking over USD 17 billion in new infrastructure development across Australia. The initiative helped in enhanced investments on new transportation infrastructure by states through sale or lease of assets. Asset classes such as ports, electricity generation, transmission and distribution and roads were leased / sold. Assets such as land title offices, lottery offices and dilapidated public housing were also taken up with governments, redeploying the money into new infrastructure in partnership with the private sector.Asset Monetisation Experience: India and Beyond
37Volume I: Monetisation Guidebook Figure 21: Major public assets monetised under the ARI
52
Figure 22: Notable investors participating in Australia’s Asset Recycling Initiative
53
52 Values in million Australian dollars – Source: Australian Asset Recycling Initiative website
53 Values in million Australian dollars – Source: Australian Asset Recycling Initiative websiteAsset Monetisation Experience: India and Beyond
38Volume I: Monetisation Guidebook CASE STUDY – PORT OF MELBOURNE
The Port of Melbourne occupies 510 hectares of land to the west and south west
of the Melbourne CBD, spanning both banks of the Yarra River from Bolte Bridge
to the river mouth. It handles around one-third of Australia’s container trade, with
operations generating total economic benefits worth approximately AUD 7.5 billion to
the national economy. During 2018-19, around 3 million twenty-foot-equivalent units
(TEU) of containers were handled by the port ( equivalent to 75 million revenue tonnes).
According to Port of Melbourne’s 2050 ‘Port Development Strategy’ released in 2019
the total container trade volumes have been forecasted to grow by 3.5% per annum
over the long term (from 3 million TEU in 2019 to around 8.9 million TEU by 2050).
The port, previously operated as a Victorian Government entity. However, in 2016,
under the Asset Recycling Initiative, a 50-year lease of the port was awarded by the
Victorian Government to a private consortium comprising Future Fund, QIC, OMERS
and Global Infrastructure Partners (GIP), for around AUD 9.7 billion. One of the key
considerations for the lease structure was maintaining and enhancing the Port of
Melbourne’s competitiveness and efficiency particularly given the critical role that the
port plays in import and export markets.
Port of Melbourne operates within a landlord model and is responsible for asset
maintenance, assessment and repair. Port operations are carried out by third party
operators and service providers. These include stevedores, provedores, pilotage, towage
and mooring services, and services relating to shipping operations. Additionally, in
order to ensure alignment with growth projections, the port has undertaken investment
in on-port rail infrastructure to reduce dependence on road transport in the freight
supply chain. It has undertaken community engagement activities and comprehensive
environmental compliance activities that protect and enhance land and marine zones
within the port’s surroundings.
Key Takeaways:
aPort’s trade-based tariff increases set under a stable, transparent regulatory regime and monitored by an external independent body, provide high pricing certainty to the port and users;
aPort also secured long-term lease agreements, which provide unregulated
and stable cash flow of around one-third of total revenue. Most leases entailed fixed increase at greater of CPI+1.5% or 4.0%; and 
aContinued investment by state in supporting transportation infrastructure such as rail link help in improving the port’s connectivity and competitivenessAsset Monetisation Experience: India and Beyond
39Volume I: Monetisation Guidebook 3.1.4 Key takeaways from ARI
Consensus of state and federal government over asset sale/lease: A formal consensus
mechanism for sale/lease of assets under the ARI was ensured between the federal and
state government.
As per the framework of the ARI scheme, the state government recommends the assets
to federal government and post approval, the asset can be brought under the ambit of
the ARI scheme.
Timebound scheme for funding: In order to ensure timeliness and to encourage
competition, the Asset Recycling Initiative window had been open for a limited period
of two years and was operated on a first come, first serve basis. Further, the bonus was
contingent upon states and territories selling and building at the same time.
Incentives to state governments: The federal government provided an additional incentive
payment aggregating to 15% of the proceeds received by the state from sale/lease of
assets. This further encouraged state government to participate in the scheme and ensure
holistic development of the country as a whole.
Commitment to invest in new infrastructure projects: Even prior to inclusion of asset
under ARI scheme, the state government is required to commit itself to invest the proceeds
in development of new infrastructure thus ensuring transparency in transaction.
3.2 INDONESIA’S LIMITED CONCESSION SCHEME (LCS)
3.2.1 Background
Government of Indonesia has recently introduced a new form of concession, i.e.  Limited
Concession Scheme (“LCS”) as an alternative to the existing Public-Private Partnership
(PPP) scheme
54
.
In order to improve connectivity between its vast regions and to ensure economic growth,
Indonesia requires significant quantum of infrastructure financing. In February 2020, the
Government of Indonesia enacted an enabling regulation (Presidential Regulation No. 32 of
2020) on Infrastructure Financing through Limited Concession Rights which introduced an
alternative scheme for financing public infrastructure through utilization of existing assets,
currently being operated by the central government and/or state-owned enterprises.
3.2.2 Features of the LCS scheme
Under the LCS scheme, the private sector is proposed to be invited to operate, maintain and
expand existing assets in return for the private sector paying the government an upfront
concession fee or instituting ongoing revenue sharing schemes with the government.
These additional revenues are aimed at enabling the government to complete its massive
infrastructure programme, in particular to fund economically important, but sub-financial
54 As s
Right of UtilizationAsset Monetisation Experience: India and Beyond
40Volume I: Monetisation Guidebook projects, such as the Trans Sumatra Highway, as well as social infrastructure projects in
less-developed regions of Indonesia.
Eligible Infracstructure SecorsKey terms and conditions
!Transportation,
!Urban utility systems
!Telecommunication
!Electricity, Oil, Gas, Renewable Energy
!Payment of compensation/ Up-front payment
!Amount of up-front payment must be formulated as owner’s estimate by the entity undertaking LCS
!Prior to transaction, to predetermine on how it will reinvest the up-front payment
!Strong emphasis on hand-back of assets
Key Criterion for assets under LCS
!Commercial operations of 2+ years
!Requires an increase efficiency of operation
!Remaining life of assets for 10+ years
Figure 23: Key features of Indonesia’s LCS initiative
Through this regulation, private sector (including, limited liability company and foreign business entity) will be allowed to manage and operate existing infrastructure assets, which consist of infrastructure, namely: transportation (seaports, airports, railways and bus terminals), toll roads, water resources, sewerage and waste management systems, telecommunications, power plants, renewable energy, oil & gas (“LCS Assets”).
To qualify as LCS Assets, infrastructure should have been in operation for at least two
years, and the remaining life of the assets must be at least ten years. LCS Assets will be put
on list and announced to public by KPPIP, an ad-hoc committee set up by the government
to accelerate development of priority infrastructure projects in Indonesia.
Aside from benefitting from the operation of a commercial asset, private sectors
participating in LCS will also partake in the financing of new infrastructures. Private sectors
will be required to pay a premium to compensate the state or state-owned enterprises for
the grant of the limited concession. This way, the government or state-owned enterprises
are able to deploy funding for development of new infrastructure assets.
3.2.3 Benefits to the public asset owners
The scheme is expected to become an alternative funding source for infrastructure
development projects. With LCS model, the government can recycle existing operational
infrastructure assets to capitalize new development or upgrade other assets, using the
upfront money from private sector.Asset Monetisation Experience: India and Beyond
41Volume I: Monetisation Guidebook In return, the private sector is granted a concession to operate LCS Assets for certain
period of time to guarantee its return of investment. Private sector partner is proposed to
be selected through a prequalifying tender organized by the relevant authorized institution
responsible for each asset. The tender is designed to be based on the estimated value of
the upfront fee to be determined by the state’s valuer or by a qualified asset valuation
company.
The private sector granted with concession will be required to transfer the upfront fee
within 6 months after the execution of LCS agreement. Upon transfer of the asset, private
sector shall be fully responsible for the operation and maintenance of the asset, including
paying applicable tax associated with the asset.
3.3 REITS IN NON-TRADITIONAL REAL ESTATE SECTORS
Globally REIT markets have seen immense growth in recent times. The cumulative market
capitalization of REITs globally is believed to be around the USD 2 trillion level. While
USA is the largest and the oldest REIT market, the market is increasingly becoming more
global. Today, over 35 countries and regions around the world have a REIT regime in
place. Globally, 15 of the 30 largest listed real estate companies in the world are REITs,
which includes 13 U.S. REITs.
Most REITs globally operate along a straightforward business model that is by leasing
space and earning rental / leasing income on the underlying real estate, which is then
paid out to shareholders in the form of dividends. REITs typically must pay out at least
90 % of their taxable income to shareholders. The key value proposition of REITs is that
they provide all investors the chance to own valuable real estate, with an opportunity to
access dividend-based income and returns, without actually having to go out and buy,
manage or finance property.
REITs invest in a wide scope of real estate property types, including offices, apartment
buildings, warehouses, retail centres, medical facilities, data centres, cell towers,
infrastructure and hotels. Most REITs focus on a particular property type, but some
hold multiples types of properties in their portfolios. The U.S. REIT market has been
fundamentally transformed over the last three decades on the back of growth of non-
traditional real estate sectors. Newer property types, such as self-storage, health care,
cell towers, and data centres now comprise over half of the total U.S. REIT market
capitalization. These non-traditional sectors in the mature U.S. and European markets
are expected to bring the next wave of growth and the emergence of listed real estate
sectors in high-growth Asian markets.
Emerging non-traditional sectors are now being structured in the U.K. and Europe where
so far, the listed market was dominated by traditional sectors.Asset Monetisation Experience: India and Beyond
42Volume I: Monetisation Guidebook Concept: I ndustrial REITs
Industrial real estate investment trusts are a specialised category of REITs that invest in 
industrial real estate properties which are occupied by facilities for manufacturing, 
production of goods and for storage, distribution such as warehouses etc. Such 
properties may either be standalone buildings or a cluster of same, whether in form of 
industrial parks or otherwise. Industrial REITs may also own the land on which these 
properties are developed. Industrial REITs, own and manage these properties, and lease 
it out to businesses/ industrial consumers.
Industrial REITs provide investors a stable and liquid way to invest in the real estate 
sector without building or purchasing industrial buildings on their own. Similar to other 
REITs, these are primarily trust based investment vehicles that pool capital from various 
nancial investors including equity funds, institutional investors, retail investors. Capital 
pooled from the investors is deployed to fund and own the industrial real estate assets, 
which are then leased out to one or multiple tenants. income from tenancy of such 
assets is used to provide a stable return to the investors in the REITs. These returns are 
in form of dividend on holding/units which are periodically paid to investors. Further, 
the unit holders also receive return by way of capital appreciation on the underlying 
property.   
As in case of REITs and InvITs in India, 90% of the income is expected to be paid to unit 
holders. Further, subject to compliance of stipulated requirements, prots from 
Industrial REITs are tax exempt.
Distribution centres and warehouses, which are collectively refers to as "logistics" real 
estate are some of the biggest industrial REITs on NYSE. Given the growth in 
e-commerce industry over the past few years, one of the biggest beneciaries of the 
growth in investment and capital deployment of industrial REITs have been 
warehousing facilities, distribution and other storage facilities. Also, with demand for 
storage and logistics rising on account of e-commerce, investors are guaranteed of 
o-take and income in investments, thereby ensuring attractiveness of instruments to 
all kinds of investors.
Benefits of Industrial REITs:
1. Flexible structure
Industrial REITs are structurally and regulatorily exible to meet the demands in an 
economic cycle. As against residential and commercial properties which are built 
specic to customer requirements, Industrial REITs, can be customized to dierent 
uses.
2. Lower Capital Expenditure
Industrial REITs are set up outside the heart of the cities and away from central business 
districts which is mostly due to the need to ensure ease of inter-city movements and 
accessibility of transportation. The acquisition costs for such properties are, hence, 
43Asset Monetisation Experience: India and Beyond 
Volume I: Monetisation Gu idebook
much lower thereby ensuring lower capital expenditure with stable return on investments.
Potential for investments in India
Given the availability of seasoned industrial parks and public sector assets of:
  a.  Warehousing corporations such as central warehousing corporation etc;
  b.  Industrial corporations;
  c.  Warehouses, silos and other such facilities etc
Concepts of Industrial REITs can be availed for leveraging private investment in such 
public sector assets for monetisation. Industrial real estate investment trusts are a specialised category of REITs that invest in 
industrial real estate properties which are occupied by facilities for manufacturing, 
production of goods and for storage, distribution such as warehouses etc. Such 
properties may either be standalone buildings or a cluster of same, whether in form of 
industrial parks or otherwise. Industrial REITs may also own the land on which these 
properties are developed. Industrial REITs, own and manage these properties, and lease 
it out to businesses/ industrial consumers.
Industrial REITs provide investors a stable and liquid way to invest in the real estate 
sector without building or purchasing industrial buildings on their own. Similar to other 
REITs, these are primarily trust based investment vehicles that pool capital from various 
nancial investors including equity funds, institutional investors, retail investors. Capital 
pooled from the investors is deployed to fund and own the industrial real estate assets, 
which are then leased out to one or multiple tenants. income from tenancy of such 
assets is used to provide a stable return to the investors in the REITs. These returns are 
in form of dividend on holding/units which are periodically paid to investors. Further, 
the unit holders also receive return by way of capital appreciation on the underlying 
property.   
As in case of REITs and InvITs in India, 90% of the income is expected to be paid to unit 
holders. Further, subject to compliance of stipulated requirements, prots from 
Industrial REITs are tax exempt.
Distribution centres and warehouses, which are collectively refers to as "logistics" real 
estate are some of the biggest industrial REITs on NYSE. Given the growth in 
e-commerce industry over the past few years, one of the biggest beneciaries of the 
growth in investment and capital deployment of industrial REITs have been 
warehousing facilities, distribution and other storage facilities. Also, with demand for 
storage and logistics rising on account of e-commerce, investors are guaranteed of 
o-take and income in investments, thereby ensuring attractiveness of instruments to 
all kinds of investors.
Benefits of Industrial REITs:
1. Flexible structure
Industrial REITs are structurally and regulatorily exible to meet the demands in an 
economic cycle. As against residential and commercial properties which are built 
specic to customer requirements, Industrial REITs, can be customized to dierent 
uses.
2. Lower Capital Expenditure
Industrial REITs are set up outside the heart of the cities and away from central business 
districts which is mostly due to the need to ensure ease of inter-city movements and 
accessibility of transportation. The acquisition costs for such properties are, hence, 
In 2005-06, 157-mile Indiana East West To ll Road connecting the Chica go Skyway to the 
Ohio Turnpike was m onetised w ith a view to fund 10-year plan for building a nd xing roads 
throughout  the state. The project was structured as a 75-year conces sion for managing 
and operating the road and collecting to lls from motorists against an upfront considera tion 
and the road remained owned by the state.
On  June  29, 2006  the Indiana  T oll  Road  Concession  Company—a  joint  ve nture 
road company—was awarded  the right to o perate the road for 75 years. The consortium 
won the contract with a winning bid of USD 3.8 billion upfront payment. The concession 
helped in nan cing the entire Indiana state’s road asset manageme nt plan for a period 
of 10 years.
 While project has been a windfall for the asset owners and the state of Indiana, 
the project’s toll revenues suered from 2008 recession impacting the pr oject’s 
debt  serviceability in the medium term.
 During 2014, the concessionaire ITR Concession Co LLC led for bankruptcy and 
the project subsequently  induct ed a new investor and management a lso allowing 
the creditors dues to be settled through the bankruptcy process. The toll road 
is since  being operated  by  Australia’s IFM  Investors  to  operate the  project  for 
the next 66 years.
Australia  has  an  established  tr ack  record in privatising  large  state-owned infrastructure 
transac tion involving  99 year lease of New South Wales electricity  distribution c ompany 
44Asset Monetisation Experience: India and Beyond 
Volume I: Monetisation Guideb ook
much lower thereby ensuring lower capital expenditure with stable return on 
investments.
Potential for investments in India
Given the availability of seasoned industrial parks and public sector assets of:
  a.  Warehousing corporations such as central warehousing corporation etc;
  b.  Industrial corporations;
  c.  Warehouses, silos and other such facilities etc
Concepts of Industrial REITs can be availed for leveraging private investment in such 
public sector assets for monetisation. TransGrid w ith the acquisition by a co nsortium of Pe nsion and Infrastructure funds for a 
nancing considera tion of AUD 10.3 billion. The consortium  members are Has tings  Funds 
Management, the  ASX-listed  Spark Infrastructure,  the  Abu  Dhabi  Investment  Authority, 
Canada’s Caisse de Depot et Placement du Queb ec (CDPQ), and Wren House, part of the 
Kuwait Investment Aut hority.
Hastings and its consortium p artne rs reached nancial close on the acquisition in Dec ember 
2016, which comprised AUD  5.8 billion debt a nd AUD 4.4 billion e quity. TransGrid remains 
a one of a kind since a number of facto rs led to the erce competition during the bid. 
TransGrid  is the most treasured of the three transmis sion and distribution co mpanies to be 
privatised in New  South Wales, probably he lped push bids higher th an the AUD 9 billion 
price tag that was estimated.
 TransGrid  is  an example of monet isation of regula ted assets  where network 
prices are set by the regulator under t he applicable Na tional Electricity Law and 
National Electricity Rules in the jurisdic tion.
 TransGrid  deal  goes  to  show that the international  ba nk  market  has sufcient 
depth  to  nance  the  acqu isition  of  even the largest infrastructure  projects 
in  Australia showing an 
jurisdictions.
 National security implica tions were a critical considera tion for the asset owners 
and hence stringent sa fegua rds were imposed on acquisit ions citing Transgrid
as critical infrastructure .  These include  that  Transgrid’s  operation  and  control 
be undertaken sole ly from Australia and that foreign consor tium me mbers retain 
an interest of no more than 50 per cent. Half of Transgrid’s board–including an 
indepen dent chair and director–must  be Australian citizens and residents.
45Asset Monetisation Experience: India and Beyond 
Volume I: Monetisation Gu idebook Preparatory
Stage
4
The section provides an overview of the
preparatory actions by public sector entities
towards undertaking asset monetisation.
It starts with a general guidance
on the process towards asset
identification and methods of
monetisation, followed by
internal administrative
actions for
formulation,
appraisal, and
approval process
(Preparatory
Stage).
Guidance
and
internal
administrative
framework for rolling
out the transactions
and completing the
asset monetisation process
(Transaction Stage) has been
covered as part of the next Section.
Preparatory Stage 47 4.1 OVERVIEW
The asset monetisation process needs to be seen as a sustainable strategy towards
improving infrastructure delivery and strengthening the public sector balance sheet.
Towards this, the public sector entity needs to institutionalise an efficient and effective
framework for creating a marketable and sustainable asset monetisation plan. The public
sector agencies need to follow a structured process along the following lines for the
Preparatory stage:
1.
Step 1 – Preparation of an asset monetisation and financing plan
2. Step 2 – Asset screening and packaging
3. Step 3 – Transaction preparation and structuring
4. Step 4 – Approval process
At the end of the Preparatory stage, the public sector agency would have a ‘transaction-ready’ asset for monetisation. An overview of the steps is shown in the figure below.
The preparatory actions identified herein are recommendatory in nature based on globally
witnessed best practices in asset monetisation process. However, it is prudent that the
public sector agency imbibes the learnings from each of the steps to ensure better service
delivery, and improved realizations from asset monetisation.
Figure 24: Process roadmap
4.2 STEP 1 – PREPARATION OF ASSET MONETISATION AND
FINANCING PLAN
The investment and financing plan would serve as overall guidance factors for the public sector agency to determine the scale of asset monetisation to be embarked upon over the medium term.Preparatory Stage
48Volume I: Monetisation Guidebook Figure 25: Sectorial investment and financing plan – Illustrative steps
55
The proposed plan should ideally cover the following areas:
Capital investment plan and project pipeline – The infrastructure gap is estimated
based on the gap between the existing infrastructure expenditure levels and expenditure
envisaged under the overall vision. The ministry/sector shall prepare a medium-term
capital investment plan aimed at bridging the gap while laying out the pipeline of projects
required to achieve the same. The capex estimates for projects shall be estimated based
on a normative approach. For the purposes of next four year period investment plan under
NIP should be treated as the pipeline.
Financing plan and scale of asset monetisation – The public sector entity may prepare
a financing plan for meeting the investment cost as laid out under the capital investment
plan or even otherwise detail an asset monetisation plan to be self-sufficient and diversify
its funding sources. The financing plan is to be prepared based on a review of the financial
position of the public sector agency combined with a reasonable estimate on the central/
state grants over the medium-term. The gap in financing from the available sources of funds
including grants/ debt (across multiple sources) and own funds, needs to be identified.
The step helps quantify the scale of financing gap to be met through asset monetisation
and help line ministries formulate a phasing plan for the same.
By end of this step, the public sector entity is expected to have a clear understanding of
the scale of funds to be mobilized through asset monetisation over the medium term viz.
over the next 5-10 years. Further, the monetisation plan of a public asset owner should
be seen not just in light of its own funding gap, but of the overall ministry/ department.
4.3 STEP 2 – ASSET SCREENING AND PACKAGING
In this step the public sector entity will identify the assets to be monetised to meet the
objectives identified in Step 1 above.
Identification of the right assets for monetisation is a multi-layered decision making task.
It involves the perspectives of key stakeholders – Government/ public sector agency,
investors, development and operation partners, private sector ecosystem including
developers, operators, tertiary material suppliers, monitoring agency and users, etc. – to
be imbibed into the asset identification process. As a near term measure, a compendium
55 TPreparatory Stage
49Volume I: Monetisation Guidebook of asset-level information reflecting key operating, financing and profitability parameters
can be maintained for internal use by concerned line ministries.
4.4 STEP 3 – TRANSACTION STRUCTURING
The Steps 1 and 2 above represent prudent actions which may be initiated by the public
sector agency for arriving at a shortlist of assets for monetisation and phasing. At the end
of step 2, a prioritised list of assets for monetisation and the method of monetisation would
be ready. This Step 3 starts with the selection of one of the assets from the prioritised list
and initiating the preparatory actions towards transaction.
Before initiating the transaction process, the public entity may need to undertake feasibility
studies for monetisation. This stage covers project preparation (including techno-economic
feasibility, valuation analysis), project structuring, preparation of standard contractual
documents and obtaining of project clearances etc. The typical steps in the project
structuring are shown in figure below.
Figure 26: Steps in project structuringPreparatory Stage
50Volume I: Monetisation Guidebook The detailed studies are aimed at exploring the project boundaries, technical configuration
and feasibility, demand projections and financial feasibility, review of policy/ legal/
regulatory environment, and the value-for-money and affordability considerations. The
scale of the studies varies based on the complexity of the proposed transaction.
aIn case of monetisation of existing brownfield assets with limited capex requirement, the studies may focus more on the financial assessment, followed by risk assessment and mitigation measures for effective O&M. This is typically useful in case of capital market instruments like InvIT and REIT models.
aIn case of transactions which require substantial capex, detailed project preparation documents to ensure feasibility of the project proposal has to be done.
This will help structure the projects so that the risks are properly allocated between public and private sector. The project structuring and risk allocation is an important input to the preparation of contract documents.
The project structuring process needs to be supported by experienced transaction
advisors with an established track record in undertaking project feasibility and structuring
transactions.
Work that will be undertaken by the transaction advisors include cost and viability analysis,
valuation analysis (of applicable), stakeholder consultation, etc. Further the consultants
will submit a transaction advisory report based on which the public sector enterprises
will internally decide on going ahead with the transaction.
At the end of this step, the public sector agency would have prepared all the project
documents related to the transaction including the backup studies and bid documents
etc. The public sector agency thereafter needs to prepare the “project proposal” in the
appropriate format depending on the category and value of transaction. Guidance/
recommendation in this regard is as provided in following sub-section. The proposal will
summarise the key observations and will be submitted to nodal authorities for approval.
Figure 27: End to End Process for Project Preparation
4.5 STEP 4 – APPROVAL/ SANCTION
Under this step, the public sector agency submits the project proposal to the competent/nodal authority for approval/ sanction.
In case of central sector agencies, the approval process has been established under the
“Guidelines for Formulation, Appraisal and Approval of Central Sector Public Private
Partnership Projects, 2013”. The appraisal/approval process is a two stage process with in-
principle approval prior to issue of RFQ and final recommendation of PPPAC for approval
of competent authority prior to receipt of financial bids. In cases where the PPP project is Preparatory Stage
51Volume I: Monetisation Guidebook Preparatory Stage Volume I: Monetisation Guidebook based on a duly approved Model Concession Agreement (MCA), ‘in principle’ clearance by
the PPP Appraisal Committee (PPPAC) may not be necessary. In such cases, final approval
of the PPP Appraisal Committee may be obtained before inviting financial bids
Further, some states like Gujarat and Tamil Nadu have established a separate agency
towards handholding line ministries as well as grant the necessary approval for undertaking
PPP projects. In other cases, it is largely under the purview of the line ministries.
Further, for non-PPP based monetisation models, Department of Investment and Public
Asset Management (DIPAM) has laid down detailed procedures and mechanisms for
Central Public Sector Enterprises (CPSEs) / Public Sector Undertakings (PSUs) / Other
Government organizations etc.
56
, however, this is primarily focused on non-core assets with
provision for adoption for core assets through Competent Authority approval.
56 https://www.dipam.gov.in/dipam/dipam_docs/assetMonetisation/Asset%20Monetisation%20
Procedure%20and%20Mechanism_0.pdf
52 Transaction
Stage
5
The section provides an overview
of the steps involved in the
Transaction Stage and the
regulatory and institutional
structure covering
each of the asset
monetisation
instruments
This
section
provides
and overview
of the asset
monetisation
processes across the
key instruments identified.
It covers the regulatory
environment towards, the key
institutional stakeholders, the
documentations involved and the actual
steps in the asset monetisation process for
each instrument.
Transaction Stage 53 5.1 INVIT – REGULATORY FRAMEWORK AND PROCESS
5.1.1 Regulatory framework and Institutional stakeholders
Regulatory framework
InvITs are independent trusts registered under the Indian Trust Act, 1882. The regulatory
framework for an InvIT issuance is guided by the SEBI (Infrastructure Investment Trusts)
Regulations, 2014 (as updated/amended from time to time)
57
.
As discussed in Section 2, the key stakeholders with respect to InvIT include the sponsor
(usually the asset owner), unit holders (usually the private sector investors), the trustee
(one who holds the InvIT assets in trust for the benefit of the unit holders), and project
managers (usually developers/ asset managers and may be private sector/ public sector
entities) and investment manager (responsible for adding assets to the InvIT / divesting
assets from the InvIT / other financing decisions related to the InvIT). The SEBI (InvIT)
Regulations, 2014 primarily provide for:
Figure 28: Elements of SEBI InvIT Regulations
Other sections covered include inspection process, procedures for action in case of default, and other miscellaneous actions.
Table 12:
Salient features of SEBI InvIT Regulations 2014
HeadRemarks
Sponsor–
Eligibility
Minimum net worth: Rs. 100 crores;
At least 5 years of experience as developer and two projects
completed
Mode of
Placement
Private Placement
Public Listing
SPV shareholding InvIT must hold at least 51% stake in the Project SPV
57 TTransaction Stage
54Volume I: Monetisation Guidebook Investment
Value of InvIT assets: Minimum Rs. 500 crores
Initial offer size of InvIT: At least § 250 crore.
For Public Placement:
� Not less than 80% of InvIT value to be invested in “completed and
revenue generating projects” in eligible infrastructure projects (directly
or through Holdco)
For Private Placement:
� Not less than 80% in eligible projects
58
Holding Period
An InvIT shall hold an infrastructure asset for a period of not less than
three years from the date of purchase of such asset by the InvIT
Payment to unit
holders
Not less than 90% of net distributable cash flows of the SPV
distributed to the InvIT;
Not less than 90% of net distributable cash flows of the InvIT distributed to unit holders;
Distribution at least twice in a year
Borrowings
A listed InvIT may issue debt securities as long as the consolidated borrowings and deferred payments (of InvIT, Holdco and SPV), net of cash and cash equivalents does not exceed 70% of the asset value
In case of aggregate borrowings and deferred payment exceeding 49%, the InvIT has to be rated AAA
Other guidelines, circulars, rules of SEBI, RBI related to InvIT are as provided in Annexure 1.
Institutional stakeholders
Sponsor
The sponsor is the entity that sets up the InvIT. In case of traditional procurement route, the public sector agency is usually designated as the sponsor and in case of PPP, the private sector developer/project SPV holding the concession agreement is the sponsor.
Trustee
A trustee is an entity holding the InvIT assets for the benefit of the unitholders and is registered with SEBI under the Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993. The activities of the trustee are regulated under a formal “Trust deed” entered to between the Sponsor, InvIT and the trustee laying out the roles and responsibilities of each members of the trust
Investment
Manager
This entity is responsible for the management of assets and investments
of the InvIT. The role of the investment manager is detailed under Section
10 of the SEBI InvIT Regulations 2014. Key responsibilities include: (i)
investment decisions with respect to the underlying assets or projects of
the InvIT including any further investment or divestment of the assets (ii)
oversee activities of the project manager with respect to compliance to the
relevant agreements (iii) work with the merchant banker and the trustee in
the issuance related documentations (iv) ensure investments of InvIT are in
accordance with the guidelines. The investment manager needs to have a
net worth of at least Rs. 10 crore and an experience in fund management
and advisory services of at least 5 years to be eligible.
58 Eligible Projects means In non-PPP projects, the infrastructure project has received all requisite approvals
for commencement of construction In PPP projects, the project has achieved commercial operations
with one-year track record, or are in pre-COD stageTransaction Stage
55Volume I: Monetisation Guidebook Project Manager
This entity brings in the necessary technical expertise for better
management of assets. The project manager shall undertake operations
and management of the InvIT assets including making arrangements for the
appropriate maintenance, either directly or through the appointment and
supervision of appropriate agents. The activities of the project manager
are regulated under a “project implementation agreement” or “project
management agreement”. This agreement is between the project manager,
the concessionaire SPV, and the trustee which sets out obligations of the
project manager with respect to execution of the project.
Other key stakeholders incidental to the InvIT registration and issuance process include
Valuer, Auditor(s), Merchant banker(s), Registrar & Transfer agent, Banks, Registrar to the
issue, Credit rating agencies, and depository participants.
5.1.2 Issuance Process
The steps in issuance depends on the whether the sponsor envisages to undertake the
InvIT issue through private placement or public issue (depending on the number of unit
holders offered to). In case of public issue, the issue of units maybe through the following
methods: initial public offer (IPO), or follow-on public offer (FPO) or any other issue made
to the public as maybe specified. Brief description of the issuance process is as follows:
Selection of assets to be put under InviT
Establishment of Infrastructure Investment trust under the Investment trust act
Engagement of merchant banker
Finalisation of other key stakeholders including trustee, project manager
Registration of InviT with Sebi
Decision on private vs public issue  - Depends on size of issuance etc.
Structuring the transaction
Completion of transfer of asset
Completion of other transaction documentation including Investment 
management, project management agreement 
Pre- Issuance  process
Issuance process and allotment of units
Listing process
Figure 29: Step by Step Issuance Process
56Transaction Stage Volume I: Monetisation Guidebook 5.2 REIT
PROCESS
5.2.1 Regulatory framework and Institutional stakeholders
Regulatory framework
The regulatory framework for an REIT issuance is guided by the SEBI (Real Estate
Investment Trusts) Regulations, 2014. REITs, like InvITs, are registered are independent
trusts under the Indian Trust Act, 1882.
The regulatory/ institutional structure is largely similar to that of InvITs except for key
differentiations in – Class of assets, eligibility/investment conditions under SEBI (REIT)
Regulations, 2014 and a common intermediary for management of assets and investment
viz. Manager (as against separate investment and project manager under InvIT – among
others.
Such key regulatory/institutional aspects (which are different from InvIT) are as highlighted
herein
Table 13:
Salient features of SEBI REIT Regulations 2014
HeadRemarks
Sponsor–
Eligibility
Each sponsor to hold not less than five per cent. of the number of units
of REIT on post-initial offer basis
Minimum net worth of Rs. 100 crores, on a collective basis;
  — Each sponsor should have at least Rs. 20 crores of net worth
At least 5 years of experience as developer and two projects completed
Investment/
Asset
Not less than 80% of REIT value has to be invested in “completed and
rent/ income generating properties” (directly or through Holdco)
No more than 20% of REIT value may be invested in under-construction projects
59
/ debt securities/ equity investment in real estate companies/
government securities/ money-market instrument/ Transfer of
Development rights acquired for utilization in a particular project/
unutilised Floor-Space-Index (FSI)
Not less than 51% of the consolidated revenues of the REIT, Holdco and SPV
60
shall be from rental, leasing and letting real estate assets or any
other income incidental to the leasing of such assets.
Borrowings
A listed REIT may issue debt securities as long as the consolidated borrowings and deferred payments [of REIT, Holdco and SPV], net of
cash and cash equivalents does not exceed 49% of the asset value
In case of borrowings + deferred payment exceeding 25%, the REIT has
to be rated AAA
59 Subject to conditions
60 ExTransaction Stage
57Volume I: Monetisation Guidebook Other guidelines, circulars, rules of SEBI, RBI related to InvIT are as provided in the
Annexure.
Institutional stakeholders
SPV is the entity which holds the controlling stake (51% or higher) either directly or indirectly
(through a holding company). It may be registered as a company (under Companies Act,
2013) or as (LLPs). The SPV should hold at least 80% of its assets directly in properties.
Sponsor – The sponsor is the entity that sets up the REIT and transfers its assets to the
same. The sponsor may choose to transfer the entire shareholding or interest/ rights to
the SPV. The sponsor may also sell its stake in the units to another party, who will be “re-
designated sponsor” for the REIT. However, such sales can happen only after a period of
three years from the date of listing.
Manager is responsible for the management of assets and investments of the REIT. The
role of the manager is detailed under Section 10 of the SEBI REIT Regulations 2014. Key
responsibilities include: (i) investment decisions with respect to the underlying assets
of the REIT including any further investment or divestment of the assets (ii) undertake
management of REIT assets including lease management, maintenance of the asset, regular
structural audits, regular safety audits etc. either directly or through the appointment and
supervision of appropriate agents (iii) work with the merchant banker and the trustee in
the issuance related documentations (iv) ensure investments of REIT are in accordance
with the guidelines.
The manager needs to have a net worth of at least Rs. 10 crore and an experience in fund
management and advisory services of at least 5 years
61
to be eligible. The activities of the
manager are regulated under an “investment management agreement” . This agreement
is between the trustee and the manager which lays down the roles and responsibilities of
the investment manager towards the REIT.
5.2.2 Issuance Process
As detailed in Section 2, the public sector agencies shall identify the asset and get the
necessary internal approvals for initiating asset monetisation. Brief description of the
issuance process is as follows:
i.
Selection of properties to be put under the REIT – This step involves the sponsor to
identify the key properties for asset monetisation. The contours of the properties need to be clearly defined so as to meet the objectives as laid out under the
REIT regulations. At least 80 percent of the REIT assets need to be invested in
“completed and rent/ income generating properties”.
ii.
Establishment of Real Estate Investment trust under the Indian Trust Act – The sponsor shall establish the Real Estate Investment Trust as per the provisions of
Indian Trust Act, 1882.
61 Further
fund management and advisoryTransaction Stage
58Volume I: Monetisation Guidebook iii. Engagement of merchant banker – The merchant banker plays a critical role as a
financial intermediary in the REIT issuance. Merchant bankers are registered with
SEBI and are regulated under the SEBI (Merchant Bankers) Regulations, 1992.
iv. Finalization of other key stakeholders – Trustee, and Manager – The next step in
the issuance process is the finalization of the trustee, and the manager. The roles and responsibilities of the key stakeholders are discussed in section above. The
hiring of trustee, and the manager shall be as per the procurement guidelines
as applicable.
v.
Registration of REIT with SEBI – The trust needs to be registered with SEBI as a
Real Estate Investment Trust (REIT). Towards this, the sponsor shall put forward
an application for registration with SEBI as per the format laid out in Schedule I
of the SEBI REIT Regulations 2014. The key documentations include: (a) General
information (b) Details of Trust (c) Details of Trustee (d) Details of Sponsor(s)
(e) Details of Manager (f) Details of Business plan and investment strategy (g)
Details of any regulatory actions and other declarations.
vi.
Completion of transfer of asset – Based on the applicable rules/ guidelines,
the sponsor(s) shall transfer or undertake to transfer to the REIT, its entire shareholding or interest [and rights] in the [holdco and/ or] SPV or ownership of the real estate properties, subject to a binding agreement.
vii.
Issue process and allotment of units – REIT shall make an initial offer of its units by way of public issue only
62
. The issue process provides a window for the
investors to participate in the bidding process for the REIT. The investors shall be allocated the proportional share in the number of units issued. The bidders shall submit their bids for the units within the bid/issue period to the lead manager. The registrar shall provide a schedule of bids received which shall indicate the bid amount received in respect of each bid. The allotment may be discretionary or based on some pre-determined criteria.
62 An
qualified institutional placement, rights issue, bonus issue, offer for sale or any other mechanism and in
the manner as may be specified by the Board.Transaction Stage
59Volume I: Monetisation Guidebook 5.3 PPP
PROCESS
5.3.1 Regulatory framework and Institutional stakeholders
Key Institutional initiatives for PPP based Projects by Government of India
In 2006, the Government took steps to create an ecosystem for mainstreaming PPPs.
This has been helpful to stakeholders in the PPP space, including private developers,
financial institutions and governments (at national, state and local levels). The key
policy and institutional initiatives undertaken include:
aSetting up of the PPP Appraisal Committee (PPPAC)
aExtending financing support through the VGF (Viability Gap Funding) Scheme
aPreparation of PPP toolkits, guidelines and knowledge dissemination products
aEstablishment of transparent and competitive bidding processes–through standardized procurement documents
At the central-level, the PPP Appraisal Committee (PPPAC) recommends project for approval of competent authority for central sector projects. Further, line ministries/ public sector agencies have adopted model concession agreements prepared by NITI Aayog (erstwhile Planning Commission). Alternatively, respective sector-specific MCAs have been developed to enable a transparent and streamlined process.
At the state-level, a few states in India have created the regulatory and institutional
structure to aid public private partnership. Key states which have a clearly defined legal
framework for private investment in public infrastructure are Andhra Pradesh, Gujarat,
Karnataka, Tamil Nadu, Uttar Pradesh, Madhya Pradesh, Rajasthan, Orissa, etc.
5.3.2 PPP procurement process
The project preparation activities of the project can be divided into three phases – project
identification (covered under Section 3), project development and approval (feasibility
studies, detailed technical studies and final approval) and project procurement.
The Project development and approval of PPP Projects has already been covered in the
previous section.
The procurement process is the process of selection of private partner. It is important
that the process of selection of the private partner is transparent, non-discriminatory,
and timely to ensure project success. While competitive procurement processes have
been the overarching theme for PPP procurement in India, the procurement steps and
regulations covering the same vary across agencies.Transaction Stage
60Volume I: Monetisation Guidebook The procedure for PPP procurement may be divided into the following four stages:
Request for
qualification
Request for
proposal
Bid evaluation
and award
Commercial close
The objective of
stage is to gather
information on
the capacities of
Applicants and
shortlisting based
on requirements to
deliver on project
outcomes.
Financial bids
from qualified
applicants (after
the RFQ stage) for
undertaking the
PPP project
Evaluation of the
RFP submissions
of the private
sector bidder and
selecting the best
proposal based on
a pre-determined
criteria.
Last stage in
procurement process
where the private
sector partner enters
in to a formal contract
with the public
sector agency for
the implementation/
management of the
PPP project.
Figure 30: Procedure for Public ProcurementTransaction Stage
61Volume I: Monetisation Guidebook Key imperatives
for Monetisation
6
This section provides an
overview of the initiatives by
Government and other
key actions suggested
for provision of
fillip to asset
monetisation
Key imperatives for Monetisation 63 6.1 RECENT INITIATIVES BY GOVERNMENT OF INDIA
The Government, over the past few years, has consistently focused on reforms and
initiatives for boosting private participation in infrastructure. And with this objective, have
been the recent initiatives towards streamlining the process of capital recycling through
asset monetisation, by public and private sector entities. Some of the key initiatives, under
Budget 2021-22, aimed at increased adoption of financing instruments and for enabling
assets monetisation by public sector entities include:
A.
Increased adoption of Financing Instruments
Key amendments pertaining to InvIT/ REIT
—Access to funds
In order to enable debt financing of InVITs and REITs by Foreign Portfolio
Investors (FPIs), Finance Act 2021 has enabled amendments in the Securities
Contracts (Regulation) Act, 1956 for recognising InvITs, REITs as “securities”.
Related amendments in SARFAESI Act and Recovery of Debts due to Banks
and Financial Institutions Act have also been undertaken under the Finance Act
2021
63
.
This will enable InvITs and REITs to borrow money from FPIs and issue debt
securities, thereby enabling replacement of expensive debt with cheaper funds.
—Streamlining taxation
Budget 2021-22 has provided clarification with respect to dividend not being
taxable at the trust level (dividend distribution tax) but in the hands of the
unitholder (dividend withholding tax). Dividend payment to REIT and InVIT will
hence be exempt from TDS.
B. Enabling Asset Monetisation by Public Sector Entities
GoI has undertaken several initiatives to address the operational/commercial challenges as also to incentivize State Governments and State level entities undertaking monetisation. The key initiatives include:
Incentive Mechanism for Capital Expenditure by State Governments
—Under the recently institutionalised Scheme for Special Assistance to States for capital expenditure for FY 2021-22, it has been decided that incentives be provided for asset monetisation and disinvestment by State government/ entities. As an incentive for asset monetisation, additional allocation equivalent to 33% of value of assets realised and deposited in State consolidated funds or in account of State public sector enterprises owning the assets. The allocation and disbursement is subject to the realised amount being necessarily used for capital expenditure by States.
63 PrKey imperatives for Monetisation
64Volume I: Monetisation Guidebook Stamp duty exemption on asset transfer from one Government-owned entity
to another such entity
—At present, assets of key CPSEs reside in their respective balance sheets. However,
monetisation may require transfer of such assets from the CPSEs’ balance sheet
to another entity or an SPV which typically may attract stamp duty implications,
ranging between 5%-10% across states, thus significantly reducing monetisation
proceeds / benefits accruing to selling CPSEs.
—To address this challenge, GoI through the Finance Act 2021 has provided for exemption of stamp duty towards transfer of asset between Government entities
64
, subject to certain requirements. This is aimed at creating a level-playing
field for asset monetisation (especially through the InvIT/ REIT route where stamp duty cost was a significant impediment to asset transfer and consequent asset monetisation).
Tax neutral provision for demerger
—The Finance Act 2021, has added an explanation to the Section 2 (19AA) of the Income Tax Act, 1961, stating that the reconstruction or splitting up of a public sector company into separate companies shall be deemed to be a demerger provided that the process involves transfer of asset to the resultant company, and the resultant company is a public sector company
65
.
—The demerger of companies as defined under this Section 2 (19AA) is considered as tax neutral and hence avoids any capital gains tax implication. Besides, set off and carry forward of losses would be allowed if proposed conditions under section 72AA of the Income Tax Act, 1961 are complied with. Benefits of past losses, if any, are also available. In view of loss of carry forward losses, tax holiday benefits etc. no longer being impediments, these changes are expected to ease the asset monetisation process for public sector infra companies
Other Relevant Aspects
Amendments to Regulations for InvIT and REIT by SEBI
—Increase in borrowing limits for InvIT and Reduction in minimum allotment and trading lot requirements for investors in publicly issued InvITs and REITs
The limit for consolidated borrowing and deferred payments under SEBI’s
regulations for Infrastructure Investment Trust has been enhanced to 70% (from
49%) of the InvIT value; subject to key requirements being fulfilled viz.
64 Ex
or asset or right in any immovable property from a Government company, its subsidiary, unit or joint
venture, by way of strategic sale or disinvestment or demerger or any other scheme of arrangement,
to another Government company or to the Central Government or any State Government, or to the
development finance institution by any law made by the…...”. , “Government company” shall have the
same meaning as assigned to it in clause (45) of section 2 of the Companies Act, 2013
65
Section 3- Finance Act 2021Key imperatives for Monetisation
65Volume I: Monetisation Guidebook
Credit rating of AAA of the InvIT debt;
Funds be utilized only for acquisition or development of infrastructure
projects;
Track record of at least six distributions on a continuous basis, post listing, in the year preceding the financial year in which the borrowings are proposed to be availed; and
Prior approval of 75% unitholders
—Securities and Exchange Board of India recently made an amendment to InVITs/REITs regulations for revision in minimum subscription and trading lot. Accordingly, for publicly issued REITs and InvITs, the revised minimum application value was brought down within the range of
₹10,000-15,000 and the trading lot to 1 unit.
This is expected to provide a boost to retail participation in InvITs/ REITs. The decision to cut entry amount is significant, as it will allow small retail investors to take part in these products.
Amendments to TOT framework
Key reform initiatives to widen the investor base for TOT transactions include:
—Flexibility in concession period – The concession period of toll projects may now
be between 15-30 years as against the fixed term of 30 years. This is expected to increase participation from Indian developers in addition to large pension funds, insurance companies, sovereign wealth funds.
—Reduced minimum operating history requirement –Minimum operating history of
one year compared to two years of operations post commencement of tolling is expected to expand the eligible universe of operating toll roads to be considered under the TOT package
Model Concession Agreements (MCAs)
—MCAs developed by NITI Aayog have been adopted by various sector to enable an evolved contractual framework, enhanced clarity on loss protection to investors and lenders, clearly defined obligations of stakeholders, etc. while roads (for TOT, BOT (toll) and HAM road assets), airports (for OMDA), and ports have availed and evolved the model concession framework over time, recently MCAs have been developed across high potential sectors like Railways (Railway station development, passenger train operations) etc. There is a need to develop model PPP concession frameworks for various other brownfield asset classes identified under the NMP for quicker adoption by public asset owners.
6.2 KEY IMPERATIVES
Asset Monetisation initiative has three critical stakeholders, the Government (Centre or State) which monetises the asset, private investor taking on ownership/ management Key imperatives for Monetisation
66Volume I: Monetisation Guidebook and the general public who are typically the users of the asset. There are considerations
of each of these stakeholder groups which must be met in order to effectively roll out a
successful asset monetisation programme.
The imperatives to give a thrust to asset monetisation are anchored across three
themes – (1) Expansion of the investor base and scaling of monetisation instruments
(2) Strengthening demand-side capacity, and (3) Creating effective frameworks to aid
monetisation.
Figure 31: Imperatives for Asset Monetisation
Pillar 1: Expanding the investor base and scaling up instruments
Streamlining investment
guidelines
The long-term nature of infrastructure projects requires active
participation from investors looking at a similar return profile from
their investments. However, the existing investment guidelines for
insurance and pension funds limit the exposure of such funds
to InvIT/ REIT assets. The investment limit are as follows: (i)
Insurance funds – Maximum exposure at lower of 3% of fund
size of the Insurer/ 5% of the units issued by a single InvIT/ REIT
(ii) Pension funds under EPFO are also regulated to invest up to
maximum of 5% of the funds in REIT/ InvIT (iii) Mutual funds can
invest up to 10% of their Assets under management in a single
InvIT/ REIT. These need to be streamlined to ensure consistency.
Moreover, there are also inconsistencies across categories on
the level of exposures. For example: IRDA regulations do not
permit investment of insurance funds in unlisted InvITs. Hence,
a staggered approach for streamlining of investment guidelines
and limits is envisaged to keep pace with the growth in the InvIT
market starting with the allocation of insurance and pension
funds towards unlisted InvITs.
Tax benefits
More tax-efficient and user-friendly mechanisms like allowing tax
benefits in InvITs as eligible security to invest under Section 54EC
of the Income-Tax Act, 1961, are important starting points for
initiating retail participation in the instruments. Key imperatives for Monetisation
67Volume I: Monetisation Guidebook Recourse under
Insolvency and
Bankruptcy Code (IBC)
Since the trusts are not considered as ‘legal person’ under the
extant regulations, the IBC regulations are not applicable for
InvIT loans. Hence, the lenders do not have existing process for
recourse to project assets. While the lenders are protected under
the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (“SARFAESI Act”)
and the Recovery of Debts and Bankruptcy Act, 1993 (the “RDB
Act”), the provision of recourse under IBC regulations will bring
in added level of comfort for the investors.
Pillar 2: Strengthening demand-side actions
Establish a transparent
and independent
process for setting cost-
reflective user charges
Development of scalable models for asset monetisation requires
a clear and transparent pricing framework for infrastructure
services which is commensurate with the risks transferred. Simply
put, the developer/ investor would envisage a risk-adjusted
return that justifies the investments towards asset development/
maintenance.
Reforming the financial
management and
accounting practices to
aid monetisation
The delineation of the revenue and expenditure specific to
the assets is an important pre-requisite for asset monetisation
transaction. The public sector agencies should increasingly
move towards asset-level financial disclosures and earmarking
of specific revenue streams across all the assets, which will help
establish investor comfort.
Creating institutional
structures for fast-
tracking asset
identification and
monetisation transaction
The institutional backbone for scaling up asset monetisation
may be anchored at the level of the relevant ministries. With the
National Monetisation Pipeline (NMP), each ministry may establish
suitably empowered working group with the sole mandate to
identify assets, method of monetisation and handhold in the
transactions/ procurement process. This pipeline will also form a
baseline for the Ministry for monitoring and tracking performance
and data on the potential assets.
Pillar 3: Creating effective frameworks to aid monetisation
Standard agreements
should be developed
across sectors
Robust MCAs have been developed in roads, ports and airport
sectors and investors have received these agreements well which
has manifested itself through increased investor participation in
projects from these sectors.
There is a need to develop model
PPP concession frameworks for various other brownfield
asset classes identified under the NMP for quicker adoption
by public asset owners. Key imperatives for Monetisation
68Volume I: Monetisation Guidebook Arrangements for
monetisation backed
by a robust incentive
mechanism
Similar to the National Partnership Agreements on asset recycling
in Australia, the Government of India may enter into formal
working arrangements with each line ministry/ CPSE/ States to
create medium-term road map for asset monetisation in line with
the NMP. The agreements shall lay out the timelines, roles and
responsibilities of each parties, preparatory actions and financing
modalities (including technical assistance support) over a 4-5 year
period. A Mechanism to plough back monetisation proceeds in
form of incentives to the public sector agency (to the extent that
the monetisation proceeds are utilized towards creation of new
assets) has already been institutionalised as highlighted above.
Effective contract and
dispute resolution
mechanisms honoring of
contracts
Contract management is a critical element in the monetisation
jigsaw. Effective mechanisms for contract management,
arbitration and conciliation are important to ensure success of
monetisation. In order to boost investor confidence, it is crucial
to maintain sanctity of contracts. The provisions should be legally
enforceable, such that once parties duly enter into a contract,
they must honour their obligations under that contract and, in
case they don’t honour, there should be adequate safeguards for
other stakeholders. This should be applicable to both public and
private sectors. Sensitising state governments and local bodies
on honoring of contracts is crucial issue.Key imperatives for Monetisation
69Volume I: Monetisation Guidebook Annexure
Annexure 71 ANNEXURE I : CIRCULARS, RULES AND GUIDELINES
PERTAINING TO INVIT
The other circulars, rules and guidelines pertaining to InvIT are as follows: aSEBI circular dated May 11, 2016 on Guidelines for public issue of units of InvITs
aSEBI circular dated October 20, 2016 on Disclosure of financial information in
offer document/placement memorandum for InvITs
aSEBI circular dated November 29, 2016 on Continuous disclosures and
compliances by InvITs
aSEBI circular dated January 18, 2018 on participation by Strategic Investor(s) in
InvITs and REITs
aSEBI circular dated April 13, 2018 on Guidelines for issuance of debt securities
by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts
(InvITs)
aSEBI circular dated April 23, 2019 on Guidelines for determination of allotment
and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)
aSEBI circular dated November 27, 2019 (amended on November 17, 2020) on Guidelines for preferential issue of units and institutional placement of units
by a listed Infrastructure Investment Trust (InvIT)
aSEBI circular dated December 24, 2019 on Guidelines for filing of placement
memorandum-InvITs proposed to be listed
aSEBI circular dated November 04, 2020 on Guidelines for rights issue of units
by an unlisted Infrastructure Investment Trust (InvIT)
Loans to InvIT – RBI Regulations
As per an RBI circular dated October 14, 2019 (RBI/2019-20/83, DBR. No.BP.BC.20/08.12.014/2019-20), the central bank has now issued guidelines on bank lending to InvITs. Such bank lending to InvITs would be subject to the following conditions:
aBanks are required to formulate a board-approved policy on exposure to InvITs covering processes, such as appraisals, loan sanctions, exposure limits, and mechanisms for monitoring
aBanks are required to undertake thorough assessment of sufficiency of cash flows at the InvIT level to ensure timely debt servicing
aThe overall leverage of InvIT and the underlying SPVs together should be within the permissible limits prescribed in the board approved policy of the bank
aBanks are required to monitor the performance of underlying SPVs, as the ability of an InvIT to meet debt obligation depends on the performance of the underlying SPVsAnnexure
72Volume I: Monetisation Guidebook
Banks are required to lend to only those InvITs, where the underlying SPVs
have existing debt and are not facing any financial difficulties
Borrowing company should provide infrastructure facilities and should have satisfactory net worth
Borrowing company or its directors/ promoters should not have defaulted on bank/FI loans
Bank financing to be restricted to 50% of the finance required for acquiring the promoter’s stake
Tenor of bank loans should not be longer than seven years
Bank financing acquisition of shares by promoters should be within the regulatory ceiling of 40% of their net worth as of March
31 of previous year
Board should have approved the proposal for bank finance
Compliance with statutory requirement as mentioned under Section 19(2) of the Banking Regulations Act, 1949
Source: RBI circular dated October 14, 2019 (RBI/2019-20/83, DBR. No.BP.BC.20/08.12.014/2019-20, National
Infrastructure pipeline 2020
The other circulars, rules and guidelines pertaining to REIT are as follows:
SEBI circular dated December 19, 2016 (amended on January 15, 2019) on
Guidelines for public issue of units of REITs
SEBI circular dated December 26, 2016 on Disclosure of financial information in
offer documents for REITs
SEBI circular dated December 29, 2016 on Continuous disclosures and
compliances by REITs
SEBI circular dated January 18, 2018 on participation by Strategic Investor(s) in
InvITs and REITs
SEBI circular dated April 13, 2018 on Guidelines for issuance of debt securities by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)
SEBI circular dated April 23, 2019 on Guidelines for determination of allotment
and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)
SEBI circular dated November 27, 2019 (amended on September 28, 2020) on Guidelines for preferential issue of units and institutional placement of units by
a listed Real Estate Investment Trust (REIT)
SEBI circular dated January 17, 2020 (amended on March 13, 2020) on Guidelines for rights issue of units by a listed Real Estate Investment Trust (REIT)Annexure
73Volume I: Monetisation Guidebook NATIONAL MONETISATION PIPELINE
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