Disclaimer: Education only, not investment advice. InvIT distributions are not guaranteed and unit prices can fall. Figures are as of the date shown at the end of the page.
In simple words (if you are in class 10)
An InvIT is not a fixed deposit. Things that can reduce your money:
- Fewer vehicles use the road (a new expressway opens next to it).
- The contract ends and the road goes back to the government, so payouts stop.
- Interest rates rise, so the InvIT pays more on its loans, and people prefer bank FDs, so unit prices fall.
- Rules change, for example a new free-travel rule or tax change.
- Big repair bills come earlier than expected.
The professional view
| Risk | What it looks like | Warning signs | Mitigants |
|---|---|---|---|
| Traffic / demand | Revenue below plan | Traffic below study for 2+ years; rising exempt share; new parallel roads | Diversified portfolio; competing-road clauses; conservative base case |
| Concession run-off | Distributions fall as assets expire | Weighted average residual concession life falling with no acquisitions | Acquisition pipeline; sponsor ROFO agreements |
| Tariff / inflation | Toll lags costs (only 40% of WPI passes through) | High WPI years with flat toll growth | Fixed 3% escalator (rule 5(1) of the Fee Rules); cost control |
| Tolling policy | GNSS tolling, 20 km free travel, annual passes, local exemptions reduce collections | Notifications without compensation clarity | Change-in-law clauses; engagement with NHAI (GNSS rules) |
| Major maintenance | Overlay earlier or costlier than plan | Rising roughness; NHAI damages | MMRA; fixed-price MM contracts |
| Interest rate | Higher debt cost; lower unit prices; HAM interest resets | Floating-rate share of debt; bank-rate cuts for HAM receipts | Fixed-rate NCDs; hedging |
| Refinancing | Bullet maturities hit in weak markets | Short tail; concentrated maturities | Laddered maturities; AAA rating |
| Counterparty | Delayed annuities or claim payments from the authority | Rising receivables ageing | Sovereign-linked counterparty; claims tracking |
| Regulatory (SEBI) | Rule changes on leverage, NDCF, valuation | Consultation papers | Generally liberalising since 2019, but not guaranteed |
| Tax | Change in character of distributions or exemptions | Finance Act changes (2023 repayment-of-debt taxation; 2026 dividend change) | Diversified component mix; see Part 4 |
| Governance / related party | Over-paying the sponsor for assets | Acquisitions at premium to independent valuation | Unitholder votes; nominee director; two valuations |
| Force majeure / social | Toll suspension (protests, pandemics) | Plaza-level disruption | FM relief and concession extension under MCA |
| Liquidity | Thin trading in units | Wide bid-ask spreads | Larger free float; index inclusion |
| Model / valuation | NAV overstated | Aggressive traffic growth, low discount rates | Read valuer assumptions; compare peers |
Real-world lessons (public examples)
- COVID-19 (2020): toll collection on national highways was suspended from 25 March 2020 and resumed from 20 April 2020; the ministry suggested the lockdown be treated as force majeure under concession agreements (Udayavani).
- Farmers' agitation (2020–21): CARE flagged toll road projects worth ₹4,800 crore at risk of termination due to prolonged plaza disruptions (CARE Ratings note).
- Audit observations: the CAG has commented on toll and concession management in MoRTH/NHAI compliance audits (CAG Report No. 11 of 2018, Chapter 11).
A five-minute risk read of any InvIT
- Weighted average residual concession life and the acquisition track record
- Toll vs annuity share of revenue
- Net borrowings / asset value and rating
- Fixed vs floating debt; next 3 years' maturities
- Distribution mix (interest / dividend / repayment) and its trend
- Traffic vs valuer assumptions, plaza by plaza
Sources
Linked inline. See also Part 3: SEBI rules.
Previous: Part 10 · Next: Part 12: Building a toll road financial model
Education only. This page is not investment, tax, legal or accounting advice, and it does not recommend buying, selling or holding any security. Laws and rules change: check the linked primary source and consult a qualified professional before acting.
Last reviewed 25 October 2026. Spotted an error? Tell us and we will correct it.