Strategic Management and Corporate Finance · Infrastructure Investment Trusts

InvIT Valuation, NDCF Distribution, Disclosures and Related Party Rules

Updated 11 October 2026 · Fact-checked

Under the SEBI InvIT Regulations, an InvIT must value its assets through an independent valuer, distribute at least 90% of net distributable cash flows to unitholders, publish periodic reports and valuation details, and deal with related parties only under strict conditions and unitholder approval. In exams, state the rule, apply it to facts, and conclude.

Understand Valuation, Distribution, Disclosures and Related Party Transactions

An Infrastructure Investment Trust (InvIT) owns income-producing infrastructure such as roads, power transmission lines or pipelines, and passes the cash they earn to investors. Investors hold units. They are not lenders and not shareholders of the underlying projects. So the law must protect them in four ways: the assets must be fairly valued, the cash must actually reach them, they must be told what is happening, and insiders must not take value out through dealings with themselves.

Valuation. An independent valuer values the InvIT's assets. The valuation drives the net asset value (NAV) of the units, and it is the check against overpaying when assets are bought from a sponsor or other related party. The valuer must be independent of the parties to the InvIT. The investment manager appoints the valuer and discloses the report to the stock exchange (for a listed InvIT) and to unitholders. Always check the current regulation text for the valuation frequency and the valuer's eligibility conditions.

Distribution. An InvIT earns through its project companies (SPVs). The cash left after expenses, debt service and the other adjustments prescribed by SEBI is the net distributable cash flow (NDCF). The regulations require the SPVs to distribute not less than 90% of their NDCF to the InvIT, subject to the Companies Act, 2013. The InvIT must in turn distribute not less than 90% of its own NDCF to unitholders. A publicly offered InvIT distributes at least once every six months. A privately placed InvIT distributes at least once a year. This is why InvITs are seen as yield products.

Disclosures and related parties. The investment manager must report regularly: financial results, annual report, NAV, valuation reports, distribution details and any price-sensitive information. Related party dealings are allowed, but they must be at arm's length, disclosed, and, above the thresholds in the regulations, approved by unitholders. Related parties do not vote on a matter in which they are interested. In a case-based answer, always follow this order: rule, facts, conclusion.

Key rules to remember

Minimum distribution by InvIT: Minimum distribution to unitholders = 90% × NDCF of the InvIT; Not less than 90%. Distributing more is allowed. Public InvIT: at least once every six months. Private InvIT: at least once a year.
Minimum distribution by SPV to InvIT: Minimum distribution by SPV = 90% × NDCF of the SPV; Subject to the Companies Act, 2013. Applies to the SPV's distribution to the InvIT, which is the first tier of cash flow.
Distribution per unit: Distribution per unit = Total distribution ÷ Number of units outstanding; Use this for numerical questions on yield per unit.
NAV per unit: NAV per unit = (Value of assets as per valuation − Liabilities) ÷ Number of units; Based on the independent valuer's figures. Use the assets and liabilities given in the question.
Core rule on related party dealings: Related party transaction = arm's length + disclosure + unitholder approval where required; Interested related parties do not vote on that matter. Verify the current thresholds in the regulations before quoting them.

How to solve Valuation, Distribution, Disclosures and Related Party Transactions questions

Use this method for any question on valuation, distribution, disclosure or related party dealings in an InvIT.

1Identify the type of question: valuation, distribution, disclosure or related party transaction. Name the SEBI (Infrastructure Investment Trusts) Regulations, 2014 as the source.
2Note whether the InvIT is public or private. Frequency of distribution and some compliance rules depend on this.
3State the rule in plain words first, such as the 90% NDCF rule or the independent valuer requirement.
4For numbers, work in two tiers: SPV NDCF to the InvIT first, then InvIT NDCF to unitholders. Use only the figures given.
5For related party facts, check who the parties are, whether the deal is at arm's length, whether it is disclosed, and whether unitholder approval is needed. Exclude interested parties from voting.
6Apply the rule to the facts in two or three lines. Do not just repeat the rule.
7Write a clear conclusion, and add the practical step: board or manager resolution, disclosure to the exchange, valuation report or trustee action.

Quickest way: Rule-Apply-Conclude with a two-tier cash check

When to use it: Use it when time is short and the question mixes numbers with a compliance point.

Underline the key words: public or private, NDCF, related party, valuer.
For distribution, multiply NDCF by 90% for the minimum and write the frequency.
For SPV questions, apply 90% at the SPV level first, then 90% at the InvIT level.
For related parties, write three points: arm's length, disclosure, unitholder approval without interested parties.
Close with one line: compliant or not, and the action required.

Common mistakes in Valuation, Distribution, Disclosures and Related Party Transactions

Writing that the InvIT must distribute exactly 90% of NDCF.
Students remember the number and drop the words 'not less than'.
Fix: Write 'at least 90%' or 'not less than 90%'. A higher distribution is permitted.
Applying the 90% rule only at the InvIT level and ignoring the SPV tier.
Students think of the trust as a single entity.
Fix: Show both tiers: the SPV distributes at least 90% of its NDCF to the InvIT, and the InvIT distributes at least 90% of its own NDCF to unitholders.
Giving the same distribution frequency for public and private InvITs.
The two types are studied together and the details blur.
Fix: Remember: public, at least every six months; private, at least once a year.
Allowing the sponsor or manager to vote on its own related party transaction.
Students treat unitholder voting like ordinary shareholder voting.
Fix: State that interested related parties do not vote on a matter in which they are interested.
Treating valuation as the manager's own estimate.
The manager runs the InvIT, so students assume it values the assets.
Fix: The valuation is by an independent valuer. The manager appoints the valuer and discloses the report, but does not do the valuation.
Quoting exact threshold percentages or time limits from memory.
These have been amended several times, and old figures stay in notes.
Fix: Quote only what you are certain of from the current regulation text. Otherwise state the principle and say 'as specified in the regulations'.

Worked examples

Example 1

Bharat Roadways InvIT, a publicly offered InvIT, owns two SPVs. SPV A has NDCF of ₹40 crore and SPV B has NDCF of ₹60 crore. Assume the InvIT has no other cash flows or expenses, so its NDCF equals what it receives from the SPVs. There are 10 crore units. Find the minimum amount each SPV must distribute, the minimum the InvIT must distribute to unitholders, and the minimum distribution per unit.

Show the solution

Step 1: SPV A must distribute at least 90% × ₹40 crore = ₹36 crore.
Step 2: SPV B must distribute at least 90% × ₹60 crore = ₹54 crore.
Step 3: Total received by the InvIT at the minimum = ₹36 crore + ₹54 crore = ₹90 crore. This is the InvIT's NDCF under the stated assumption.
Step 4: The InvIT must distribute at least 90% × ₹90 crore = ₹81 crore to unitholders.
Step 5: Distribution per unit = ₹81 crore ÷ 10 crore units = ₹8.10.
Step 6: Being a public InvIT, it must make distributions at least once every six months. SPV distributions are subject to the Companies Act, 2013.

Answer: SPV A: ₹36 crore. SPV B: ₹54 crore. The InvIT must distribute at least ₹81 crore, which is at least ₹8.10 per unit, paid at least every six months.

Example 2

The sponsor of Sagar Power InvIT proposes to sell a transmission asset to the InvIT. The sponsor is a related party. The investment manager has the asset valued by the sponsor's own in-house team, and proposes the price on that basis. The sponsor intends to vote on the unitholder resolution approving the deal. Advise on compliance.

Show the solution

Rule: the InvIT's assets are valued by an independent valuer. Related party dealings must be at arm's length, disclosed, and approved by unitholders where the regulations require it. Interested related parties do not vote on the matter.
Facts: the valuation is by the sponsor's in-house team. That is not independent, and the sponsor is the seller and interested in the price. The sponsor also wants to vote on its own transaction.
Analysis: a price based on a non-independent valuation cannot show that the deal is at arm's length. The sponsor's votes cannot count on a resolution in which it is interested.
Conclusion: the proposal as it stands is not compliant. The investment manager must appoint an independent valuer, fix the price with reference to that valuation, and make the required disclosures to the stock exchange and unitholders.
Practical step: place the resolution before unitholders if the regulations require it for this deal. Count only the votes of unitholders who are not interested. The trustee should review the transaction and the manager should keep records of the process.

Answer: The deal is not compliant as proposed. It needs an independent valuation, arm's length pricing, full disclosure and unitholder approval where required, with the sponsor excluded from voting.

Exam tips

In numerical questions, show the SPV tier and the InvIT tier separately. Marks are given for each stage.
Write 'not less than 90%', never 'exactly 90%', and mention public (six-monthly) versus private (annual) frequency.
For case questions, follow provision, analysis, conclusion. Add a drafting or compliance point such as a resolution, an exchange disclosure or a trustee action.
Avoid quoting thresholds and day limits unless you are certain they match the current regulations. A correct principle earns more than a wrong figure.
These papers are written, so use short headed points: valuation, distribution, disclosure, related parties. This makes a long answer easy for the examiner to follow.

Practice questions from Infrastructure Investment Trusts

Valuation, Distribution, Disclosures and Related Party Transactions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Valuation, Distribution, Disclosures and Related Party Transactions: frequently asked questions

What is NDCF in an InvIT?

NDCF is net distributable cash flow, the cash available for distribution after the adjustments SEBI prescribes. It is calculated at both the SPV level and the InvIT level. The 90% distribution rule applies to it.

Does an InvIT have to distribute 90% of its profit?

No. The rule is based on net distributable cash flows, not accounting profit. A project can show a profit and still have limited cash, or the reverse. Use the term NDCF in your answer.

Who values the assets of an InvIT?

An independent valuer carries out the valuation. The investment manager appoints the valuer and discloses the valuation report. The valuation is used for NAV and for checking the price of acquisitions from related parties.

Can related parties vote on a related party transaction of the InvIT?

Interested related parties do not vote on a matter in which they are interested. Only the other unitholders decide. Check the current regulations for the thresholds that require unitholder approval.