Transcript Slide 1

Equity Outlook
Recovery gains momentum- Macro Indicators
•
Industrial production growth has turned around, accelerating
11.7% YoY during November 2009 compared to a trough of
0.2% YoY during February 2009.
Industrial Production near V shaped recovery
20
IIP (%) YoY
•
Two-wheeler sales growth accelerated to an average of 13.4%
YoY during the three months ended October 2009 compared
to the bottom of -9.9% YoY registered during the quarter
ended December 2008. Passenger car sales accelerated to an
average of 26.5% YoY during the three months ended October
2009 compared to the bottom of 1.2% YoY registered during
the three months ended January 2009.
3 per. Mov. Avg. (IIP (%) YoY)
15
10
5
0
Export(%) yoy
3 per. Mov. Avg. (Export(%) yoy)
20
0
-20
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
-40
Jan-08
Source: Bloomberg
Recovery has been V shaped
Jul-09
Sep-09
Nov-09
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Discretionary spending improving
40
Nov-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
Source: Bloomberg
Export decline narrows
60
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
India’s export rose by 18.2% yoy for the first time in 14
months in December as recovery in the global economy
boosted demand.
Sep-07
•
Sep-05
Nov-05
Jan-06
-5
Corporate Funding resumed – Balance Sheet being repaired
•
With improving liquidity and the growth environment in the
developed world, the equity flows have rebounded back.
•
Capital raising exercise have resumed with Indian corporate
being able to raise over Rs92,500 crs till Nov 2009 thus
leading to reduced balance sheet stress.
•
The inflows in second half is expected to be much more
robust with some big IPO’s expected to hit the market.
•
This quick revival in global risk appetite means that Indian
corporate sector could access risk capital from international
capital markets easily.
•
This is helping the corporate sector to repair their balance
sheets faster, thus reducing the risk of vicious feedback of
large non-performing loans in the banking system, increased
risk aversion and slower growth.
ECB/FCCB approvals are also seeing a strong turnaround
Portfolio flows have turned positive from start of FY10
FDI inflows have been robust during past 3 months
Funding has helped corporate repair there Balance Sheet
Indian Markets –Valuations are reasonable
Valuations are at an reasonable level
35
Equity Valuations vs Bonds on the edge
Sensex trailing PE
30
25
20
15
10
Source: Morgan Stanley Research
•
•
•
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
5
Source: Morgan Stanley Research
Valuations are not expensive when looked at from a global perspective
Valuations in conjunction with expected earnings growth looks very reasonable
We could see further earnings revision as a good support for the current valuations
Valuations at Reasonable level considering
growth prospects
Conclusion - India in a sweet spot
India in a sweet spot
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–
–
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Macro indicators are showing signs of recovery with revival being V shaped
Currencies are stabilizing and global flows have resumed
Risk appetite has increased – Capital raising back in action
Corporate balance sheets have been repaired
Growth momentum has been restored- Earnings should bounce next
and Historically Earnings growth has been superior
Stock picking to be rewarded going ahead in FY11
Valuations at slightly below long terms average
Inflation and interest rate are below average
Political environment is stable
Economy
Globally have the
factors turned
positive?
In India have the
factors turned
positive?
On its way
to recovery
On its way
to recovery
Valuation
Yes
Yes
Policy
Yes
Yes
Earnings
Credit
No. Should rebound
Spreads have come
by last quarter of back to the pre lehman
CY09
days
Have already
Yes, Corporate bond
started to rebound
spread down
Market
Sentiment
Yes
Yes
Yes
Yes
All these factors lead to a favorable risk reward for equity
Infrastructure growth
momentum to continue
Infrastructure – Benefits pass from one generation to the next
800
7%
700
6%
600
5%
500
4%
400
3%
300
2%
200
1%
100
0
0%
FY2006
FY2007
Total GDP (US$ billion)
FY2008
Infra Spend as % of GDP
Total GDP (US$ billion)
• Infrastructure spending in India has lagged behind its global
peers resulting in most of the segments in the economy
constrained in terms of capacity availability.
• Infrastructure investment in India for FY2009 is estimated at
US$67.6 billion (5.8% of GDP) as compared to
China’s Infrastructure investment estimate of US$389.6
billion (9% of GDP) over the same period*
• The infrastructure sector has witnessed a sharp acceleration
in recent years
• Government has announced USD$ 292 billion of
Infrastructure spending under the XIth Plan (2007 to 12)
• An increase of 145% over the Xth Plan (2002 to 07)
• Opening doors for private sector / foreign investment in
infrastructure projects such as energy, petroleum,
telecommunications transportation sectors etc.
FY2009
• Total infrastructure
investments as a
percentage of GDP has
been increasing steadily
and is expected to
reach 9.22% of GDP by
FY2012*
Projected Spending as % of GDP
Source: Morgan Stanley, Bloomberg, Internal
*Source: Morgan Stanley
Sense of urgency on part of the Government quite visible
Factors driving demand for better infrastructure
•
ECONOMIC FACTORS
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–
•
DEMOGRAPHIC FACTORS
–
–
•
Growing economy
Rising disposable incomes
Rising population
Increasing urbanization
GLOBAL INTEGRATION
–
Rising international trade and
travel
•
Puts stress on
ROADS
–
•
AIPORTS
–
•
High turnaround time, poor
connectivity at ports
RAIL
–
•
10-14% power shortages, frequent
brown outs
PORTS
–
•
Delays, congestion, fuel wastage in
air travel
POWER
–
•
Inadequate road width, poor riding
quality, low speeds
Massive under capacity in railways for
freight and passenger capacity
WATER supply and sanitation
–
Major contributor to diseases
Source: CLSA
Can today’s infrastructure support tomorrow’s growth?
Some Physical Targets for Infrastructure under the
Eleventh Plan (FY2008 to 2012)
Sector
Electricity
Objective under the the Eleventh 5-Year Plan
- Additional power generation capacity of about 70,000 MW
- Reaching electricity to all un-electrified hamlets and providing access to all rural households
- Six-laning 6,500 Km of Golden Quadrilateral and selected National Highwyas
National Highways - Developing 1,000 Km of expressways
- Expansion of the national highway network
- Dedicated freight corridors
- 10,300 Km of new rilway lines
Railways
- Introduction of private entities in container trains for rapid addition of rolling stock and
capacity
Ports
- Capacity addition of 485 million MT in major ports, 345 MT in minor ports
Airports
- Modernization and redevelopment of existing airports
- Construction of 7 Greenfield airports
Irrigation
-Development of 16 million hectares through irrigation works
Telecom & IT
- Achieving a subscriber base of 600 million rural connections
Source: Investment in Infrastructure during the Eleventh Plan as published by the Secretariat for the Committee on Infrastructure
Infrastructure growth momentum expected to
continue in the coming years
Government spending to drive Infrastructure growth
Rs. Crore (at 2006-07 prices)
Sector
2007-08
2008-09
Electricity (incl NCE)
74,205
92,829
116,541
146,914
186,038
616,526
Roads
51,352
54,318
58,729
67,901
79,516
311,816
Telecom
33,075
39,834
50,293
63,408
80,390
267,001
Railways (incl MRTS)
33,207
39,964
48,626
59,738
76,466
258,001
Irrigation (incl Watershed)
27,002
33,839
42,625
53,946
65,718
223,131
Water Supply and Sanitation
25,840
31,110
37,868
46,555
57,754
199,127
Ports
9,691
11,740
14,271
17,397
20,841
73,941
Airports
6,223
6,459
6,814
7,296
7,956
34,748
Storage
3,777
4,098
4,446
4,824
5,234
22,378
Gas
2,984
3,454
4,005
4,651
5,407
20,500
267,355
317,646
384,217
472,630
585,321
2,027,169
Total Investment
Investment as % of GDP
5.95
6.48
2009-10
7.19
2010-11
8.12
2011-12
Total 11th Plan
9.22
Source: Investment in Infrastructure during the Eleventh Plan as published by the Secretariat for the Committee on Infrastructure
Infrastructure growth momentum expected to
continue in the coming years
7.53
Core infrastructure
needs focus…
Energy- Major capacity addition embarked
• India ranks fifth in the world in terms of total
installed power generation capacity*
– Ranks as one of the lowest in terms of per
capita consumption of power
– World average consumption of electricity is
at 2,490 kWh.
• Canada’s per capita consumption is at
18,329 kWh
• US is at 14,057 kWh.
• China’s is at 2,160 kWh
• India’s per capita consumption of
electricity is 631 kWh
• Total investments in the power sector are
likely to go up*
– Estimated US$48bn in the 10th plan
– US$100bn in the 11th plan
– US$170bn in the 12th plan.
• Growth in the 12th plan is predominantly
expected to be driven by private players -The
private sector is expected to add 57% of planned
capacity. This compares with the historical
average of 10%*
*Source: CLSA
Construction- Direct beneficiary of infrastructure spend
• Construction work is estimated to be 25-95% of total
infrastructure spending in each segment*. With a
total likely infrastructure spend of US$312bn*, the
volume of construction jobs from infrastructure is
likely to increase by 83% to US$180bn with the
biggest increases from power, ports and airports.
• Private Investment in road projects estimated to be
Rs.1,125 billion under the Eleventh Plan as
compared to Rs.70 billion in the 10th Plan**
• As project size and complexity increase, it will be
difficult for smaller players to qualify for these
projects (technically as well as financially) as a
result the strong well established players would gain
from market share
• Apart from the infrastructure spending, the
construction contractors are all set to see strong
growth in jobs from pick up in industrial capex and
real estate
* (excluding telecoms) Source: CLSA
**Source: CLSA
Cement – Long term positive but supply concerns in the near term
•Cement capacity grew rapidly since 2006 and is expected ramp up by another 33% by 2012
with another 72 million tonnes coming on stream*
•The gap between demand and effective supply is expected to widen to 51 million tonnes by
March 2011, before it starts declining again*
•Cement consumption has been growing at nearly 10% y-o-y during FY10*
•Capacity utilisation levels expected to decline and oversupply concerns in the near term as
capacity ramps up faster than demand in the near term
•Long term growth would be driven by the expected boost in infrastructure
spending in India
*Source: CMA data, Credit Suisse estimates
Metals – Leading the recovery cycle
• Metal sector driven by revival in global GDP growth with end user segments
such as infrastructure, transportation and housing showing sign of revival
• Indian demand for metals expected to remain robust on the back of strong
demand drivers such as infrastructure and autos
• Non ferrous metal prices have seen a revival as restocking of inventory
in anticipation of demand pick up
• Pressure on steel prices appears to have eased due to rise of steel prices in China
Telecom – Near term pressure remain
•
The Indian telecom industry has grown by a
CAGR of 80% over the last 7 years to reach a
total subscriber base of 400 million in FY 09*
•
India witnessed robust subscriber growth despite
the economic downturn averaging 9 million plus
additions per month over the last six months
•
Current penetration levels of approximately
40% still leave growth opportunities over the
next few years**
•
Advent of 3G in the Indian telecom would
provide the next step of growth
•
Potential value unlocking through the
infrastructure business of telecom majors
•
However advent of new players has increased
competitive intensity in the industry which
would lead to near term pressure on the
profitability of the existing players
*Source: Merril Lynch
**Source: COAI, TRAI
Financial Services – Backbone of Infrastructure development
•
Total infrastructure spending in the XIth plan is estimated to be US$ 500 Bn, of which
US$ 105 Bn can be the total debt financing opportunity during the XIth plan*
•
Bank credit to infrastructure projects has actually risen to its highest level in the
past four years
•
Power sector requirement remains the highest with the total outlay constituting a
third of the total infrastructure spend in the XIth plan
•
Equity was a bottleneck for infrastructure companies to achieve financial closure on
projects, however, improving capital markets and capital raising announcements,
augur well for the filling of this gap too.
* US$ 500 Bn total spend * 30% private spending
* 70:30 D/E ratio
Infrastructure lending as a % of bank credit increasing
Infrastructure spending increasing rapidly
Power sector – largest funding requirements
Why Bharti AXA
Focused Infrastructure Fund?
Why “Focus” on Core Infrastructure?
3000
2500
29% CAGR
2000
13% CAGR
1500
10% CAGR
1000
29-Dec-09
29-Oct-09
29-Aug-09
29-Jun-09
29-Apr-09
28-Feb-09
29-Dec-08
29-Oct-08
29-Aug-08
29-Jun-08
29-Apr-08
29-Feb-08
29-Dec-07
29-Oct-07
29-Aug-07
29-Jun-07
29-Apr-07
28-Feb-07
0
29-Dec-06
500
BSE 100 Index (adjusted for infra related sectors)#
BSE 100 Index
Source: MFIE, Bloomberg, Internal
Average returns of Top 5 Infrastructure Funds$
Past Performance may or may not be sustained in the future. The above graph is for illustrative purposes only and
in no way indicates or is providing any assurance of the possible returns from Bharti AXA Focused Infrastructure Fund.
#BSE 100 Index (adjusted for infra related sectors) is a depiction of BSE 100 returns after removing the sectors in
which
Bharti AXA Focused Infrastructure Fund will not invest (as detailed in preceding pages).
$ The portfolio composition and the benchmarks of the Top 5 Infrastructure Funds – shown in graph above –
may vary from that of Bharti AXA Focused Infrastructure Fund. The Top 5 Infrastructure funds have been selected on
the basis of returns given by open-ended infrastructure funds for the period Jan 1, 07 to Jan 4, 10.
Methodology and Analysis of returns
• In order to analyze the performance of the focused infrastructure sectors as identified by
us under Bharti AXA Focused Infrastructure Fund, we plotted the BSE 100 Index (broad
diversified index) against an adjusted BSE 100 Index after removing all the companies
that belong to non infrastructure sectors (as identified by us under Bharti AXA Focused
Infrastructure Fund)
• The results show that the core infrastructure sectors have returned a CAGR of 29% over the
period Jan 1, 07 to Jan 4, 10 as compared to a CAGR of 10% for the BSE 100 over the
same period
• During this period, the Top 5 infrastructure funds, depicted above,
have given a CAGR of 13%
• History shows that focusing on core infrastructure has paid handsome dividends in the past
• We believe this trend will continue in the coming years given the impetus on infrastructure
investment both from the government as well as public-private partnerships
Bharti AXA Focused Infrastructure Fund ≠ Company Concentration
• Bharti AXA Focused Infrastructure Fund is also different from the “Focused” Funds
currently available
• We are “Focused” in terms of the sectors that we will invest in, while NOT being
“Focused” with regards to Company Concentration
What does this mean in terms of portfolio allocation?
•SEBI regulations in terms of maximum single issuer concentration limit of 10%
would also apply to the portfolio
• In addition, prudent single stock concentration limits would apply to ensure that
there is no excess concentration towards any single company
• Thus, while the Fund Manager can take a concentrated position in a particular
infrastructure related sector, he has to maintain adequate diversification in
terms of number of stocks invested in
A “Truly Focused”
INFRASTRUCTURE
FUND
Sectors identified for
Sectors excluded for
INVESTMENT
INVESTMENT
A clear mandate to invest only in specific sectors
(as defined by AMFI) that are primarily engaged in
infrastructure and related activities:
Cement & Cement Products
Construction
Energy
Industrial Manufacturing
Metals
Services
(only infrastructure related
services e.g. transportation)
Telecom
Financial services
Furthermore, the fund has gone a step further and
also laid out the sectors that it will not invest in,
namely the following:
Paper I Pharma I Textile
Media & Entertainment
Fertilisers & Pesticides
Consumer Goods
Chemicals
Services
(other than infrastructure related)
IT
Banks & other
Financial services
Automobiles
Contd…
Contd…
• The above sectors cover the entire universe of listed equities in
India. As a result, there is no ambiguity with regards to the
investment strategy of the fund.
• Bharti AXA Infrastructure Fund is the First truly Focused
Infrastructure Fund with clearly laid out sectors that the fund will
AND will not invest in.
• Investors are assured that by investing in Bharti AXA Infrastructure
Fund they would get exposure only to companies engaged in
Infrastructure activities.
Bharti AXA Focused Infrastructure Fund: Scheme Snapshot
Scheme Name
Category
Bharti AXA Focused Infrastructure Fund
An Open–Ended Equity Scheme
Investment Objective
The Scheme seeks to generate long term capital appreciation
through a portfolio of predominantly equity and equity related
securities of companies engaged in infrastructure and infrastructure
related sectors
The Scheme is not providing any assured or guar
Fund Manager
Mr. Prateek Agrawal
NFO Opening date
January 20, 2010
NFO Closing date
February 15, 2010
Re-opening date
March 11, 2010
Entry Load
Nil
Exit Load
1% if redeemed within 1year from the date of allotment
Benchmark
BSE 100 Index
Investment Options
Special Products Available
- Growth Option for capital appreciation
- Quarterly Dividend Option offering Dividend Re-investment and
Dividend Pay-out facilities
- Regular Dividend Option offering Dividend Re-investment and
Dividend Pay-out facilities
- Daily SIP
- Daily STP
- Monthly SIP
- Monthly STP
The Equity team
Prateek Agrawal
Head - Equity
Prateek is a Post Graduate Diploma in
Management (PGDM) from Xavier’s Institute
of Management (XIM-B).
Suresh is a A Bachelor of Commerce (Hons)
from University of Bombay with specialization
in Advance Accounts and Auditing.
He is experienced both on the sell and buy
side during his career spanning 14 years. He
started his career in research with SBI capital
where he spent 10 years. He moved to ABN
AMRO AMC in 2004 where he set up the
research function. He then moved to fund
management in 2005, and became Head Equity in June 2006. In this role he managed
INR 9 Billion of funds and oversaw a total of
INR 12 Billion of equity AUM.
He has over 21 years of experience in the Indian
Mutual Fund industry. He has worked in various
capacities in the industry such as Credit
Appraisal Officer, Coordinator, Fund Account,
Research Analyst, and Trader. Suresh worked in
UTI for 10 years before joining DSP Merrill
Lynch in 1992 as a Research Analyst. He then
moved to DSPML AMC where he played an
active role in portfolio construction and
developing trading strategies.
Suresh Kamath
Head – Equity Dealing
Saurabh is an MBA from ICFAI Business
School (IBS - Hyderabad).
Gaurav is a Chartered Accountant and an
MBA from Indian Institute of Foreign trade
(IIFT) in the year 2005
Gaurav Kapur
Research Analyst
Before joining Bharti AXA IM, Gaurav was the
Equity Analyst at Birla Sun Life Asset
Management Co. In his experience of over
three years, Gaurav has also been associated
with other reputed organizations like Aditya
Birla Management Corporation Limited and
M/s S.K. Mittal & Co.
Saurabh Kataria
Research Analyst
Before joining Bharti AXA Investment
Managers, he was the Senior Analyst at Askar
Capital Infrastructure Private Equity Fund for
2 years. Prior to moving to the buy side, he
worked as a sell side analyst for a total of two
years at Goldman Sachs and Irevna Research (
Standard & Poors).
Performance & portfolio of
existing equity funds
Performance as on January 18, 2010
Bharti AXA Tax Advantage Fund –
Performance as on Jan 18, 2010
Performance (Absolute%)
6 Months
Since Inception
Bharti AXA Tax
Advantage Fund Regular Plan Growth Option
S&P CNX
Nifty
40.0%
147.9%
20.6%
90.9%
Past performance may or
may not be sustained in
future.
Performance of the
dividend Plan for the
investor would be net of
the dividend distribution
tax, as applicable
Bharti AXA Equity Fund –
Performance as on Jan 18, 2010
Performance (<1 Year Absolute% & >1Year
Compounded Annualised)
6 Months
Last 1 Year
Since Inception
Bharti AXA Equity
Fund - Regular Plan Growth Option
S&P CNX
Nifty
30.6%
93.9%
74.4%
20.6%
85.9%
73.2%
Bharti AXA Equity Fund: Portfolio as on Dec 31, 09
Bharti AXA Tax Advantage Fund: Portfolio as on Dec 31, 09
Statutory Details / Risk Factors
Statutory Details: Bharti AXA Mutual Fund has been set up as a Trust (under the Indian Trust Act, 1882) by AXA Investment Managers,
Sponsor of the Fund. The Sponsor is not responsible for any loss resulting from the operations of the schemes beyond the contribution of an
amount of Rs.1 lakh made by it towards setting up the Mutual Fund. Trustee: Bharti AXA Trustee Services Private Limited, a limited liability
company. Investment Manager: Bharti AXA Investment Managers Private Limited, a limited liability company. Risk Factors: All mutual
funds and securities investments are subject to market risks and there can be no assurance that the Scheme’s objectives will be
achieved and the NAVs of the Schemes may go up or down depending upon the factors and forces affecting the securities market. The
names of the Schemes do not in any manner indicate either the quality of the Scheme(s), their future prospects or returns. Past
performance of the Sponsors and their affiliates / AMC / Mutual Fund and its Scheme does not indicate the future performance of the
Scheme of the Mutual Fund. Investors in the Scheme are not being offered any guaranteed / assured returns. Bharti AXA Focused
Infrastructure Fund is an open-ended equity scheme. Investment Objective: The Scheme seeks to generate long term capital appreciation
through a portfolio of predominantly equity and equity related securities of companies engaged in infrastructure and infrastructure related
sectors. Asset Allocation Pattern: Equity and equity related securities of companies engaged in infrastructure and infrastructure related
sectors – 65% to 100% and Debt & money market securities/instruments# - 0 to 35%. # no investments will be made in securitized debt.
Term of Issue: Units are being offered at Rs.10/- per unit during the New Fund Offer Period and at NAV based prices upon re-opening.
Scheme Re-opens for continuous sale and repurchase on: March 11, 2010. Load Structure: Entry Load – Nil, Exit Load – 1% if redeemed
within 1 year from date of allotment. Bharti AXA Equity Fund is an open-ended Equity Growth fund,. Investment Objective: To generate
income and long-term capital appreciation through a diversified portfolio of predominantly equity and equity-related securities including
equity derivatives, across all market capitalizations. Bharti AXA Tax Advantage Fund is an open-ended equity linked savings scheme.
Investment Objective: The Scheme seeks to generate long-term capital growth from a diversified portfolio of predominantly equity and
equity-related securities across all market capitalisations. The Scheme is in the nature of diversified multi-cap fund. Copies of Scheme
Information Document /Key Information Memorandum/ Statement of Additional Information can be obtained at any of our Investor Service
Centres or on the AMC Website www.bhartiaxa-im.com. Mutual Fund investments are subject to market risks. Investors are requested
to read the Scheme Information Document, Statement of Additional Information & Addenda carefully before investing.
Disclaimers
Information given herein is as of January 19, 2010. Statements relating to outlook and forecast are the opinions of the
Author. The views expressed by the author are personal and are not necessarily that of Bharti AXA Investment Managers
Private Limited (AMC). Information given here is not intended to be any investment advice. Please make independent
research / obtain professional help before taking any decision of investment / sale. AMC makes no representation as to
the quality, liquidity or market perception on any securities/ issuer / borrower; if described above, nor does it provide
any guarantee whatsoever. Information and material given here is believed to be from reliable sources. However, AMC
does not warrant the accuracy, reasonableness and/or completeness of any information. AMC does not undertake to
update any information or material given herein. Decisions taken by you based on the information provided are to your
own account and risk. AMC and any of its officers, directors and employees shall not be liable for any loss or damage of
any nature, as also any loss of profit in any way arising from the use of this material in any manner. AMC or its
directors, officers and employees, including author / persons involved in the preparation or issuance of this material
may, from time to time, have long or short positions in, and buy or sell the securities, if any, mentioned herein or have
other potential conflict of interest with respect to any recommendation and related information and opinions given
over here. The information given herein, or any part of it, should not be duplicated, or contents altered / modified, in
whole or in part in any form and or re-distributed without AMC’s prior written consent. © Bharti AXA Investment
Managers Private Limited 2009.
NFO Opens: January 20, 2010
NFO Closes: February 15, 2010
Offer Re-Opens on: March 11, 2010
THANK YOU