Answered by Manish Satnaliwala | Founder and Managing Director, TruNorth | NorthAxis Advisory
A privately placed InvIT raises capital from institutional investors and qualified institutional buyers (minimum 5 and maximum 1,000 investors under SEBI norms) through a Placement Memorandum, whereas a public InvIT issues units to retail, high-net-worth, and institutional investors through a public offer document and lists on a recognized stock exchange with active public trading.
Regulatory flexibility differs materially: privately placed InvITs can invest up to 100% in completed assets or under-construction assets (if agreed with investors), and leverage can extend up to 70% of InvIT asset value subject to credit ratings (AAA/AA) and track record. Public InvITs face stricter under-construction caps (maximum 20% non-completed assets) and mandatory quarterly reporting.
Privately placed InvITs may be listed on stock exchanges without public trading or remain unlisted, giving sponsors institutional capital access with reduced ongoing public retail disclosure burdens.
Choosing between public and private routes dictates the entire capital raising strategy, the investor profile (global sovereign funds vs. domestic retail/mutual funds), governance overhead, compliance costs, and future liquidity.
Evaluating whether anchor institutional funds (pension funds, CPPIB, GIC, NIIF) prefer private bilateral governance rights or exchange liquidity.
If the portfolio contains significant assets nearing completion, a privately placed structure offers greater asset flexibility.
Public InvITs offer broad market liquidity but involve retail investor scrutiny, trading price volatility, and rigorous stock exchange compliances.
Assessing how debt caps (49% baseline, up to 70% with AAA rating and track record) apply across both structures under SEBI guidelines.
Many sponsors mistakenly assume a public IPO is the only path. For mid-sized portfolios, establishing a privately placed InvIT with one or two sovereign or pension anchors is often far more efficient, confidential, and cost-effective than a public retail offering.