InvITs can deliver 12–15% return, nearly double of FDs and debt funds: Capital Infra CEO Manish Satnaliwala

Manish Satnaliwala, CEO of Capital Infra

Infrastructure Investment Trusts (InvITs) are quietly changing the way Indians invest in infrastructure, offering bond-like stability with better returns. But only a few investors know about them. While global markets have long embraced such vehicles, India caught on only around 2017, with structures ranging from public and private listed InvITs to unlisted options.

Institutional investors seem to prefer private formats to tackle public market volatility and as a result, only five of India’s 26 InvITs are listed publicly.

In an interview to Moneycontrol, Capital Infra chief executive officer Manish Satnaliwala demystifies InvITs — how they deliver predictable, annuity-like returns to why retail investors should pay attention. With Rs 4,500 crore in assets and big expansion plans, Capital Infra is betting big on public InvITs. Edited excerpts of the interview:

InvITs are slowly gaining traction. How do you position Capital Infra in this space?

We are a public listed InvIT. Our assets are annuity-based, which means they generate almost fixed returns backed by government contracts, which is sovereign counterparty, offering stable cash flows. Currently, our AUM (assets under management) stands at Rs 4,500 crore and we aim to scale it beyond Rs 11,000 crore by 2027 through new assets.

For our public listed InvIT, the minimum investment is Rs 15,000. Liquidity is decent — you can exit in two to three days via the exchanges. In contrast, private InvITs tend to have lower liquidity and longer exit timelines, sometimes taking a month or more.

How do returns compare with other instruments like bonds or equity funds?

Our annuity-based InvITs typically offer 11–13 percent IRR. These are stable, unlike variable toll-based models where returns can fluctuate based on traffic and usage. For example, if your capital cost is around 6 percent and cash yield is 10 percent, your equity IRR comes to about 12–13 percent. This compares favourably to listed bonds that offer 7–8 percent and with a better risk-adjusted profile.

The payouts — interest and dividend are taxable but not return of capital — are subject to certain conditions. Dividend is taxed depending on the tax regime the asset choose. Under the new regime, dividends are taxed at slab rates. There’s no special exemption as was once available under the old regime. It’s similar to how interest from debt mutual funds or bonds is taxed now.

Why haven’t more investors, especially retail, embraced InvITs?

Awareness is still limited. People tend to favour traditional instruments like FDs (fixed deposits) or mutual funds. There are only a handful of public InvITs and very few are actively adding new assets. For instance, PSUs like PGInvIT are not currently acquiring new assets. That narrows the playing field to just a few active players like us.

What are the key risks in this asset class?

The primary risks are macroeconomic such as interest rate fluctuations, which impact the cost of debt. Since part of the payout comes from interest income, a downward interest rate (linked to G-sec or bank rates) may reduce net yield. Also, asset additions are key. An InvIT that isn’t adding assets stops growing, and that deters investors.

Can you explain the different infrastructure asset classes and their impact on returns?

There are three key asset types. For toll-based assets returns can vary due to traffic and pricing, generally yielding 10 percent annually. Under HAM (hybrid annuity model) the government pays fixed annuity so it’s stable, around 12–13 percent. Then there are power transmission assets. These offer fixed returns and are backed by contracts, hence low-risk. The returns vary depending on the asset class. Variable assets might give high returns but come with risk. Fixed assets like HAM or power give more predictable returns, suitable for conservative investors.

How do InvITs compare to traditional fixed-income instruments?

Most fixed-income instruments in India offer 7–8 percent pre-tax. If you choose the right infrastructure asset class through an InvIT, you could earn 12–15 percent pre-tax, depending on leverage and asset performance. That’s a significant edge. It’s not equity-level risk but the returns can compete if managed well.

How does cash flow distribution work in InvITs?

InvITs are required to distribute at least 90 percent of the net cash flow to investors. The distribution typically includes repayment of capital and interest income or dividends. There are tax advantages as well. Some distributions may not be taxable depending on the tax structure and age of the SPV. However, since cash is distributed regularly, NAV tends to decline over time unless new assets are added.

What’s your advice for investors looking at InvITs?

InvITs should be part of a diversified portfolio, just like you have equity, debt, and mutual funds. Allocate 5–10 percent to infrastructure InvITs. They are long-term plays, ideally held for three to five years. If the InvIT continues to add new assets, the NAV stabilises or grows, and you continue receiving cash flows. Invits are natural hedge between debt and equity product. If you remain invested for three, five or or seven years you can achieve return of 200 to 300 basis points more than the traditional debt product.

How do you see the future of this market?

Globally, the concept exists in the form of infrastructure trusts or REITs but India has made good progress in structuring it with transparency. SEBI’s framework ensures public disclosures, periodic updates, and investor protection. Some countries don’t even require a trust manager; India’s trust-plus-manager model is more robust.

From 2015 to now, we have seen strong CAGR growth in the space. With India's push for asset monetisation across roads, railways, and logistics, InvITs will become a key vehicle. As more public assets get monetised, the sector will expand significantly. The next 18–24 months will be crucial. We expect three or more new listed InvITs to enter the market.