| Prudential ICICI Infrastructure Fund hopes to ride on the back of the boom in infrastructure spending.
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| The boom that is happening in India's infrastructure spending has new takers. Prudential ICICI Mutual Fund, the country's largest private sector mutual scheme with assets under management of Rs 17,042 crore, is the latest to launch an infrastructure fund, following two funds already existing in this segment.
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| Prudential ICICI Infrastructure Fund, an open-ended equity scheme, will invest predominantly in companies belonging to the infrastructure space.
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The scheme which opened for subscription on July 18, 2005, will close on August 10, 2005.
How prudential ICICI schemes fared
(Returns in % as on July 28, 2005) | | | 3
months | 6
months | 1
year | 2
years | 3
years | Since
inception | | Prudential ICICI Discovery Fund | 22.19 | 33.92 | - | - | - | 67.4 | | Prudential ICICI Emerging STAR Fund | 25.08 | 35.57 | - | - | - | 53.6 | | Prudential ICICI Growth Plan | 24.02 | 24.67 | 63.07 | 49.35 | 42.83 | 26.42 | | Prudential ICICI Power | 23.19 | 24.75 | 69.04 | 56.81 | 54.84 | 14.75 | | Diversified funds - category average | 17.02 | 25.43 | 61.63 | 59.10 | 48.89 |
- | | Source: www.mutualfundsindia.com |
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| Considering that infrastructure is one of the thrust areas for the overall growth of the economy, the fund is planning to invest in those companies that are expected to get favourable impact "� directly or indirectly "� by the large expected investments in infrastructure-related sectors.
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| These include banking, financial services, cement, coal, engineering and construction, power, electronic components, metals, housing and telecom.
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| "India's dependence on infrastructure development to maintain its current momentum of growth will be the key driver for growth of infrastructure and related sectors," says Pankaj Razdan, managing director, Prudential ICICI Asset Management Company.
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| Infrastructure sector plays an important role in country's development and GDP growth. According to the fund, the removal of regulatory and availability constraints on products and services has catalysed investments, attracted competition and rationalised costs, leading to a new growth trajectory.
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"The projected outlay for infrastructure development by both the private and public sectors is sizable in the times to come and we see it as a rewarding opportunity for long-term equity investors to leverage upon," Razdan adds. The benchmark for the scheme will be CNX Nifty Index.
Peer profile
(Returns in % as on July 28, 2005) | | | 1 month | 3 months | 6 months | 1 year | | DSP ML TIGER Fund | 13.03 | 17.17 | 20.37 | 56.57 | | Tata Infrastructure Fund | 8.61 | 11.16 | 20.74 |
- | | Index | | S&P Nifty | 6.88 | 19.46 | 15.48 | 45.63 |
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| The two other funds which have walked the same path before are DSP Merrill Lynch TIGER Fund and Tata Infrastructure Fund.
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| These two schemes have done reasonably well since inception. The DSP ML TIGER Fund, which was launched in May, 2004, gave a one-year return of 56.57 per cent compared to 45.63 per cent posted by the Nifty.
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| However, the fund failed to beat its peer group (diversified funds) average for the same period at 61.63 per cent.
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| In a similar vein, both the TIGER Fund and Tata Infrastructure Fund (launched in December 2004) managed to beat Nifty returns for the six-month period (see table) while lagging behind the peer group average of 25.43 per cent.
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| Prudential ICICI Mutual Fund's other equity funds have acquitted themselves well over the years, though they have not exactly been among the top performers.
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| Prudential ICICI Growth Plan has given an average return of 42.83 per cent over the past three years, while Prudential ICICI Power has managed 54.84 per cent, beating the peer group average of 48.89 per cent.
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| However, over a two-year period these two funds have lagged behind its peers. The funds have actually done better over shorter periods of time.
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| Newly launched funds like Discovery Fund and Emerging Star Fund have managed to beat peer group category averages comfortably during the period they have been in existence.
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| Considering the fact that the thrust on infrastructure spending is likely to strengthen in the years to come, it is a safe bet to assume that the companies in the segment is likely to witness good growth.
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| However, considering the wide spectrum of sectors that the fund proposes to tap into and the run-up in markets, much will depend on the stock-picking abilities of the fund manager.
RESEARCH CALLS
| | | SONA KOYO (hold)
According to a report from ASK Raymond James, Sona Koyo's June 2005 quarter results have been disappointing on the operational front.
| | | | There has been a decline in operating margins by 180 basis points to 9.4 per cent. Even as margin pressure on the company is expected to continue, the firm expects the earnings to grow at a CAGR of 17 per cent during FY05-07.
| | | | The long-term exports potential is also good for the company. At the same time there has been a surge in sales to Hyundai Motors, which reduces Sona Koyo's dependence on Maruti.
| | | | But the firm has downgraded the stock to 'hold' with the target price of Rs 75. In the short to medium term with the current P/E of 17 for FY06E and 14.1 for FY07E, the stock offers limited upside potential.
| | | ACC (downgraded from buy to add)
Though ACC's June 2005 quarter results were better than expected, an ABN Amro report has downgraded it from 'buy' to 'add'.
| | | | However, it believes that the company's recent decision to sell its refractory business shows renewed momentum on restructuring.
| | | | The firm has raised its target price to Rs 487. The company's EDITDA margins continue to see structural improvements and the outlook on the cement sector for the medium term remains bullish.
| | | | The firm's conclusions are based on the assumptions of a growth in ACC's cement volume by 10 per cent in FY06 and 7 per cent in FY07.
| | | | The risks involved are a price war in major domestic markets and a slowdown in demand due to bad monsoon.
| | | | TRENT Tata group's retailing arm, Trent, continued its growth buoyancy in June 2005 quarter. Operating margins expanded by 410 basis points.
| | | | ASK Raymond James expects the revenue momentum to sustain. The uptick in revenues was so strong that it outpaced the increased cost of goods sold in the quarter.
| | | | The report further informs that Trent plans to open 17 new stores over the next three years and upgrade or expand some existing stores, involving a capex of Rs 81.1 crore.
| | | | The report estimates an EPS of Rs 16.5 for FY06E and a P/E of 40.4. |
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