Reviewed by Team BuyUnlistedShares Research Desk
What are unlisted InvIT shares?
Infrastructure Investment Trusts (InvITs) are securities that pool money from investors to own and operate revenue‑generating infrastructure assets such as roads, power transmission lines, or pipelines. When an InvIT has not yet completed its initial public offering, its units are termed “unlisted InvIT shares.” They represent a proportional stake in the trust’s underlying assets and entitle holders to a share of the cash flows generated by those assets.
Who can invest in unlisted InvIT shares?
Eligibility is governed by the trust’s private placement memorandum and applicable securities regulations. Generally, the following categories may participate :
- Individual Indian residents who meet the minimum investment threshold set by the InvIT (often ₹2 lakh or higher).
- High net worth individuals (HNIs) and family offices.
- Non‑resident Indians (NRIs) and foreign portfolio investors, subject to FEMA and RBI guidelines.
- Corporate entities, trusts, and partnership firms that are allowed to invest in private placements.
Investors should verify the specific criteria in the offer document before proceeding.
How to buy unlisted InvIT shares: step‑by‑step process
- Obtain the private placement memorandum (PPM) or offer document from the InvIT sponsor or an authorized intermediary.
- Complete the investor suitability questionnaire and provide KYC documents (PAN, address proof, bank details).
- Transfer the required subscription amount to the designated escrow account as per the payment schedule in the PPM.
- Receive the allotment confirmation and the units will be credited to your demat account (if the InvIT offers demat holding) or you will get a certificate of holding.
- Monitor communications from the InvIT for quarterly distributions, annual reports, and any material updates.
Illustrative example: If an InvIT offers units at ₹120 each and the minimum lot is 500 units, an illustrative investment would be ₹60,000 (this number is only for illustration and not a recommendation).
Key documents and disclosures to review
- Private Placement Memorandum (PPM) – outlines the trust’s structure, assets, risk factors, and use of proceeds.
- Valuation report – shows the fair value of the underlying infrastructure assets.
- Shareholder agreement or trust deed – details governance, distribution policy, and exit rights.
- Audited financial statements of the sponsor and the project special purpose vehicles (SPVs).
- Any material litigation or regulatory approvals pending.
Pay special attention to the liquidity provisions: unlisted units may have lock‑in periods or restrictions on transfer before a potential listing.
Tax treatment of gains and dividends from unlisted InvIT shares
Tax consequences depend on the nature of the receipt and the holding period.
- Dividends or interest‑like distributions received from an InvIT are generally taxable in the hands of the investor as income from other sources at the applicable slab rate.
- If the units are sold before listing, the gain is treated as a short‑term capital gain if held for less than 36 months, taxed at the slab rate; if held for more than 36 months, it is a long‑term capital gain taxed at 20 % with indexation benefit (as per current provisions for unlisted securities).
- After the InvIT lists on a stock exchange, the same capital‑gain rules that apply to listed equity securities apply (short‑term if held ≤12 months, long‑term if >12 months).
- Tax deducted at source (TDS) may apply on distributions; investors can claim credit while filing their return.
These points reflect the current tax law; investors should consult a tax professional for advice tailored to their situation.
Risks to consider before investing
- Liquidity risk – unlisted units may not be easily sold; exit may depend on a future IPO or secondary market arrangements.
- Valuation risk – the fair value of infrastructure assets can be affected by regulatory changes, traffic/revenue shortfalls, or project delays.
- Concentration risk – an InvIT may hold a small number of large assets, making performance sensitive to a single project.
- Regulatory risk – changes in tariff policies, tolling rules, or environmental clearances can impact cash flows.
- Credit risk – the ability of the underlying SPVs to service debt influences distributable cash.
Investors should weigh these risks against their investment horizon and risk tolerance.
Frequently Asked Questions
Question : What is the typical minimum investment for unlisted InvIT units?
Answer : The minimum amount varies by trust but is often set between ₹2 lakh and ₹5 lakh for individual investors. Check the specific offer document for the exact figure.
Question : Can I sell my unlisted InvIT units before the trust lists?
Answer : Sale before listing depends on the transferability clauses in the PPM. Some trusts allow private transfers subject to board approval, while others impose a lock‑in period. Liquidity is generally limited compared to listed securities.
Question : Are distributions from unlisted InvITs guaranteed?
Answer : No. Distributions depend on the cash flow generated by the underlying infrastructure assets and are subject to performance, operational, and regulatory factors. There is no assurance of a fixed return.
Question : How is the fair value of an InvIT’s assets determined?
Answer : An independent valuer appointed by the trust conducts a valuation using methodologies such as discounted cash flow, comparable transactions, or replacement cost.
Question : What happens to my units if the InvIT proceeds with an IPO?
Answer : Upon listing, the unlisted units are typically converted into listed equity shares of the InvIT on a one‑to‑one basis. You can then hold them in your demat account and trade them on the exchange like any other listed security.
Question : Do I need a demat account to hold unlisted InvIT units?
Answer : Many InvITs offer the option to hold units in demat form; however, some may issue physical certificates. Check the offer document to see the holding mode provided.
This article was reviewed by Team BuyUnlistedShares Research Desk, whose reviewers hold NISM Series XV (Research Analyst) certification and NISM Series V-A (Mutual Fund Distributor) certification. The desk is NOT a SEBI-registered Research Analyst or Investment Adviser. Nothing in this article constitutes investment advice or a recommendation to buy, sell, hold, or avoid any security. Investments in unlisted securities carry significant liquidity, regulatory, and listing-timing risks. Consult a SEBI-registered Investment Adviser for personalized financial planning.