Baroda Pioneer Infrastructure Fund Presentation


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Baroda Pioneer Infrastructure Fund

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Baroda Pioneer Infrastructure Fund Presentation

  1. 1. 2 Ag bu outp ricu rg l eo ut to tural nin g d mee em t an d Ability to en-cash our demographic advantage hinges on India’s future three main catalysts t Bu o de gro ild live wth ing r inf incl ras us tru ive ctu re
  2. 2. Infrastructure - There is no alternative • Linkage between infrastructure development and economic growth is a well established fact • Sustained economic growth after the initial euphoria can only be managed through infrastructure investment • As poorer nations begin to grow the deciding factor that attracts much needed capital is the infrastructure - China is far ahead of India on this parameter • Correcting historical imbalances needs implementation of an affirmative action plan for infrastructure development • Economically unviable natural resources can be made viable through development of infrastructure in those locations • Infrastructure is now a surrogate for economic growth and is increasingly seen by the political establishment as a means to retain and remain in power 3
  3. 3. Infrastructure - Sweetening the mix India’s Economic Growth @ 7% India’s Commitment to build world India grows @ 10% - every 1% class infrastructure spent on infrastructure could add • Largest pool of employable 1% to the GDP says World Bank talent under the age of 30 • Basic infrastructure for all – power, roads, water • Low cost manufacturing and service destination • Advanced infrastructure – high speed road and rail network, • Large population with an wireless broad band appetite for consumption driven lifestyle • Stable economic & political environment 4
  4. 4. India vs. China - Miles to go India China Area ( Sq Km) 3,287,263 9,569,961 Population Density (per sq km) 355 140 Road- Expressways 320 41,005 Airports 349 482 Power Generation Capacity (GW) 150 793 Power Consumption - per capita ( Kwh) 487 2,272 Steel Consumption - per capita ( kg) 38 338 Cement Consumption - per capita ( kg) 154 1,084 Source: CIA World Fact-book 5
  5. 5. India vs. China - Learning from them • While it is easy to dismiss the Chinese model as totalitarian, there are several sound economic reasons for its success • China has always used infrastructure investment as a means to bolster their growth e.g.- large infrastructure spends from the stimulus package in 2009 helped the economy grow at a rate close to 9% in a very difficult year • China’s infrastructure has been built on a series of interconnected economic needs unique to them e.g. - development of world class infrastructure around its special economic zones to facilitate quick movement of goods from factories to its ports • Holistic investment with an eye on future needs has meant that China has pumped in massive funds to finance their infrastructure needs e.g. China plans to spend nearly $4.5 trillion on energy infrastructure alone between 2010 and 2030 • Infrastructure has not been a matter of choice, but of need – insurance against political unrest in a large unmanageable country, gaining competitive advantage over the fast growing neighbours etc. 6
  6. 6. “Infrastructure” - The story unfolds 7
  7. 7. Indian Infrastructure - 3Ps • P1 - Planned allocations for infrastructure in the XI edition at unprecedented levels • P2 - Public-Private partnership model for development • P3 - Political will cutting across party lines 8
  8. 8. Indian Infrastructure - 3Ps Tenth Plan Eleventh Plan Airports 1437 310 Electricity 648 68 2584 Gas 1034 6665 Irrigation (incl. WD) 2919 48 224 Ports Railways (incl. MRTS) 1449 Roads & Bridges 3142 97 Storage 1197 1115 141 169 Telecom Water Supply and Sanitation 2618 2533 Rs. bn 880 9
  9. 9. Infrastructure - The big theme Infrastructure investment projected to dominate the capex mix 7000 10 9 6000 8 5000 7 6 Rs. bn 4000 % 5 3000 4 2000 3 2 1000 1 0 0 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Investment in infrastructure 2252.46 2702.73 3215.79 3892.67 4791.17 5959.13 Infra Investment as %of GDP 5.43 5.98 6.53 7.25 8.19 9.34 Source: Plan document - Panning Commission 10
  10. 10. Indian Infrastructure - Improved outlook for execution • Planning commission has projected massive USD 421 bn of infrastructure investments in XI plan (FY08-12) (3 x X plan investments) - we expect USD 300 bn of infrastructure investments in XI plan, still commendable ( 2.3x X plan investments) • While quantity of projects is not an issue, execution and viability of these projects has improved since the UPA government was elected in mid-2009 • The major focuses for the spending are power (32% of total spending), highway (15%), railways (13%) • Government financing of the projects remains critical, as 70% of the entire infrastructure plan is publicly financed • However, use of public-private partnership (PPP) structures is increasing for new projects, and liquidity has returned to the market for both equity and debt financing 11
  11. 11. PPP - The way forward • Of the XI plan investment of Rs 20.5 tn, 30% is expected from private participation as against 20% in the X plan • Private participation requires financial as well as operating resources to execute various infrastructure projects in a more speedy and innovative manner • We expect the project to be expedited after a lull in FY’09 because of: • A marked improvement in the Indian economy along with reviving global cues • Incentives introduced for the PPP model • A softer interest rate regime leading to easier access to liquidity and a interest burden (a key concern since projects are funded by debt to the extent of 70–80%) • Policy measures initiated to unplug the bottlenecks to project execution (mainly in the roads segment), which have been a principle cause of delays in project awards • Measures to unlock liquidity introduced in the two stimulus packages • Softening of commodity prices 12
  12. 12. Infrastructure - Opportunities exist across all verticals • Power • Roads & Bridges • Railways • Irrigation • Airports • Ports • Oil & Gas 13
  13. 13. Some case studies Company Details FY – 2004 (Rs. mn) FY – 2009 ( CAGR Growth (%) BHEL Net Sales 72640 193654 22 PAT 6944 28592 33 Market Cap 147957 736409 38 L&T Net Sales 109471 403712 30 PAT 7354 29340 32 Market Cap 14290 393971 94 IVRCL Net Sales 7766 50741 46 PAT 419 2259 40 Market Cap 2206 16227 49 Nagarjuna Construction Net Sales 7575 41367 40 PAT 314 1544 38 Market Cap 314 1544 38 Source: Capital Line 14
  14. 14. Companies playing the infrastructure theme Source: Internal Compilation 15
  15. 15. Presenting Baroda Pioneer Infrastructure Fund NFO: 3 May - 31 May 2010 16
  16. 16. Scheme top-lines • Baroda Pioneer Infrastructure Fund offers one of the prime catalyst for India’s growth - “Infrastructure” as a theme for investors • The scheme as a part of its investment strategy will endeavor to create a core infrastructure portfolio • Offers the investor an opportunity to benefit from the growth potential of all sectors under the “Infrastructure” umbrella • A right time investment as companies in the infrastructure space offer good value from a long-term perspective • The benchmark of the scheme is CNX 100* 17
  17. 17. Scheme Basics Investment Objective: The primary investment objective of the Scheme will be to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of companies engaged in infrastructure and infrastructure related sectors. Asset Allocation: Under normal circumstances, the broad investment pattern will be as under. Instruments % of Total Assets Equities and equity related securities including derivatives engaged in 65-100 infrastructure sectors and infrastructure related sectors* Debt and Money Market Instruments 0-35 *Investment in derivatives may be made upto 50% of the net assets of the Scheme. The exposure/investments of the scheme in Equities and equities related instruments + notional exposure of derivatives + debt and money market instruments shall not be more than 100% of the net assets of the scheme. 18
  18. 18. Scheme Features Features Investment Plans/ Options : Growth and Dividend Unit offer price : Rs. 10 per unit Entry Load : Nil Exit Load : 1.00% if redeemed on or before 365 days from the date of allotment of units, Nil if redeemed after 365 days from the date of allotment of units Minimum investment : Rs. 5,000 and in multiple of Re. 1 thereafter Benchmark : CNX 100* Risk Profile of the Scheme • Risks associated with companies operating in the Infrastructure Sector • Equity instruments carry both company specific and market risks and hence no assurance of returns can be made in respect of these investments • Equity and equity related securities are prone to daily price fluctuations and the liquidity of investments made in the Scheme • Risk associated with investment in Fixed Income and Money Market instruments which may involve Interest Rate risk, Spread risk, Credit risk or default risk, Liquidity & Settlement risk, performance risk, prepayment risk and market risk etc. • Risk associated with investment in Derivatives which involve Credit Risk, Illiquidity Risk etc. 19
  19. 19. Industries where we will invest Cement Industrial Products Construction Minerals & Mining Construction Projects Non Ferrous Metal Engineering Oil Ferrous Metals Petroleum Products Financial Institutions Power Gas Telecom Equipment & Accessories Industrial Capital Goods Telecom Services Transportation Housing Finance 20
  20. 20. Equity investment process - Integrating three pillars of investment specialists Supporting a global range of products through an aligned investment process Buy Discipline • Define investment case • Identify discount • Construct Portfolio Fundamental Analysis Quantitative Analysis • 45 global equity analysts • 31 global quant equity analysts • Career Analysts • Stock screening & idea • Extensive company contacts Portfolio generation and research coverage Management • Strategy Back-test • Valuation • Performance monitoring • Idea generation/Sponsor stocks • Risk control Sell Discipline • Target price reached • Story changes • Better opportunities 21
  21. 21. Investment approach The key factors of the investment strategy of the scheme will be : • Top-down economic and market research to provide a strategic direction for our sector allocation • Indentifying attractive opportunities on the basis of the government policies research report and overall economic conditions • The stock selection will take into consideration of various factors like Fundamentals of the business, Market Capitalisation Industry structure, Quality of management, etc. • Sector weightage and stock selection within the sector • Our equity analysts conduct bottom-up fundamental research into stocks to assess management quality, competitive positioning and growth potential • The portfolio will be sufficiently diversified by investing in number of companies without any restriction of market capitalization 22
  22. 22. About Baroda Pioneer • Baroda Pioneer Asset Management Company Limited is a joint venture between two large and well-established financial services companies - Bank of Baroda and Pioneer Investments • Baroda Pioneer Mutual Fund is positioned to serve the varied asset management needs of investors in India through a range of equity, debt and money market offerings • Since the formation of the joint venture in 2008 Baroda Pioneer has have been working relentlessly to create an operational and servicing platform well suited to the exacting requirements of our existing and potential investors • Baroda Pioneer Mutual Fund is amongst the fastest growing asset management companies in India with assets of about Rs.2,984 Cr. (as on 31 Dec’09). The company operates out of 14 locations in India 23
  23. 23. Risk Factors Disclaimer: *Baroda Pioneer Infrastructure Fund is not sponsored, endorsed, sold or promoted by India Index Services & Products Limited ("IISL"). IISL does not make any representation or warranty, express or implied, to the owners of Baroda Pioneer Infrastructure Fund or any member of the public regarding the advisability of investing in securities generally or in Baroda Pioneer Infrastructure Fund particularly or the ability of the CNX 100 Index to track general stock market performance in India. The relationship of IISL to the Issuer is only in respect of the licensing of certain trademarks and trade names of its Index, which is determined, composed and calculated by IISL without regard to the Issuer or Baroda Pioneer Infrastructure Fund. IISL does not have any obligation to take the needs of the Issuer or the owners of Baroda Pioneer Infrastructure Fund into consideration in determining, composing or calculating the CNX 100 Index. IISL is not responsible for or has participated in the determination of the timing of, prices at, or quantities of Baroda Pioneer Infrastructure Fund to be issued or in the determination or calculation of the equation by which Baroda Pioneer Infrastructure Fund is to be converted into cash. IISL has no obligation or liability in connection with the administration, marketing or trading of Baroda Pioneer Infrastructure Fund. Investment Objective: Baroda Pioneer Infrastructure Fund - The primary investment objective of the Scheme will be to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of companies engaged in infrastructure and infrastructure related sectors. Asset Allocation Pattern: 65- 10% Equities and equity related securities including derivatives engaged in infrastructure sectors and infrastructure related sectors. 0-35% Debt and Money Market Instruments Load : Entry Load - Nil, Exit Load : - 1% if redeemed on or before 365 days. Terms of Issue and sale & redemption of units: Issue of units of Rs. 10 each for cash during the new fund offer and at NAV based price during the ongoing offer. The scheme offers sale and redemption facility on all business days during the ongoing offer. The NAV of the Scheme would be calculated for all business days. The SID & SAI / Key Information Memorandum cum Application form are available at AMC and Registrar Office and Investor Service Centres/ the AMC website Distributors. Statutory Details: Baroda Pioneer Mutual Fund has been set up as a Trust under the Indian Trust Act, 1882. Sponsors: Pioneer Global Asset Management S.p.A and Bank of Baroda. Trustees: Board of Trustees of Baroda Pioneer Mutual Fund. Investment Manager: Baroda Pioneer Asset Management Co. Ltd. Risk Factors: Baroda Pioneer Infrastructure Fund is only the name of the Scheme and does not in any manner indicates the quality of the Scheme, its future prospectus or return. All Investment in Mutual Fund and securities are subject to market risk and there is no assurance or guarantee that the objective of the Scheme will be achived. The NAV of the scheme can go up or down depending upon the factors and forces affecting the capital market. Past performance of the scheme, the sponsors or its group affiliates are not indicative of and do not guarantee of future performance of the scheme. The sponsor is not responsible or liable for any loss resulting from the operation of the scheme beyond their initial contribution of Rs. 10 lacs towards setting up of the Mutual Fund and such other accretions and additions to the corpus. Please read the Statement of Additional Information (SAI) and Scheme Information Document (SID) carefully before investing. Investor will be advised to refer to the details in the Statement of Additional Information and independently refer to his tax advisor. Contact Points: Baroda Pioneer Asset Management Company Ltd. 501 Titanium, 5th Floor, Western Express Highway, Goregaon (E), Mumbai - 400063. Phone: +91 22 3074 1000 / 4219 7999. Fax: +91 22 3074 1001. E-mail: Website: Toll Free No: 1800 419 0911