LT Infrastructure 012011

L&T Infrastructure Fund
(An Open Ended Equity Scheme)
Jan 2011

An Open Ended Equity Scheme

Size of Infrastructure Sector in India

The revised XIth Five year plan (2007-2012) has projected Rs.20.5 trillion spend for Infrastructure development in India, a growth of around 127% over the comparative Xth plan period Investment in the infrastructure sector during the XIIth Plan expected to be Rs. 41 trillion, a growth of 100% over the XIth five year plan Infrastructure spending for the XIth plan amounts to 7.6% of GDP over the plan period. The spending for the XIIth plan is expected substantially higher at close to 10% over the plan period
Source Source -Infrastructure.gov.in

Size of Infrastructure Sector in India
Around 85% of the planned expenditure for the XIth plan is On Electricity, Road and Bridges, Telecommunication, Railways And Irrigation
The private sector contribution is expected to be 36% of the spend for the XIth plan as against 30% planned originally and 25% for the Xth plan.
Source Source -infrastructure.gov.in

Infrastructure sector has not participated in recent rally

% Performance 3 Years
72.4109 54.4904 54.8348 59.1859
BSE AUTO
BSE FMCG
BSE Health Care
BSE IT
BSE METAL
BSE OIL & GAS
S&P CNX Nifty
-13.0217 -23.3148
-3.6028
Source -NSE , BSE as on 3-Jan-2011

An analysis of why the Infrastructure Sector did not perform in line with market
Deferment of capital expenditure by the corporate sector due to global financial crisis has impacted the performance Economic downturn resulted in lack of availability of capital required for implementation of projects Hurdles in implementation such as land availability for roads, adverse bidding mechanism, etc. resulted in low interest in bidding for contracts set out by the NHDP Lack of equipment availability, delay in environmental and forest clearances for setting up power plants, lack of availability of water, etc. resulted in slower implementation. Lower bankability for merchant power based business model for power plants as against the widely accepted PPA model further added to the delay in financial closure. Political issues such as Telengana hampered the implementation of projects in Andhra Pradesh, especially irrigation projects Slowdown of infrastructure capital expenditure in the overseas markets particularly Middle east and South East Asia

Why Infrastructure Push Now ?

The revised XIth Five year plan (2007-2012) has projected Rs.20.5 trillion spend for Infrastructure development in India, a growth of around 127% over the comparative Xth plan period The World Bank is exploring to invest in an $11 billion debt fund the Indian government will roll out by next year as part of a massive push to its infrastructure sector. There is at least $50 billion to $60 billion untapped investor potential in water and sewage treatment projects in India , according to latest World bank estimates Foreign investors are likely to fund up to 30 percent of India's $18 billion road projects in the current fiscal year, a figure expected to only grow exponentially in coming years .(Reuters) Indian Government has set target of 30,000 mw of power from renewable energy including 20,000 mw from solar power by 2022, and invited German companies to collaborate in these areas.
Source - Business world & Reuters.

Infrastructure sector has delivered returns in long term

% Performance 5 Year
160.7751 125.9087 125.1088 111.3035 80.4057 134.0116 107.5583
BSE AUTO
BSE FMCG
BSE Health Care
BSE IT
BSE METAL
BSE OIL & GAS
S&P CNX Nifty
Source -NSE , BSE as on 3-Jan-2011

Infrastructure Opportunity Performance of Infrastructure Sector Growing Importance of Private Sector Product Features

Figures for projected spends on XIth plan
Accelerated spending on Infrastructure in the XIth Plan has added over Rs 4 trillion to the trend outlay Source Source infrastructure.gov.in
10

Figures for Revised spend on XIth & estimated XIIth plan
Accelerated spending on Infrastructure in the XIIth Plan proposes to add almost Rs 7 trillion more to the trend outlay Source infrastructure.gov.in
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20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
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1/1/2004 3/1/2004 5/1/2004 7/1/2004 9/1/2004 11/1/20 1/1/2005 3/1/2005 5/1/2005 7/1/2005 9/1/2005 11/1/20 1/1/2006 3/1/2006 5/1/2006 7/1/2006 9/1/2006 11/1/20 1/1/2007 3/1/2007 5/1/2007 7/1/2007 9/1/2007 11/1/20 1/1/2008 3/1/2008 5/1/2008 7/1/2008 9/1/2008 11/1/20 1/1/2009 3/1/2009 5/1/2009 7/1/2009 9/1/2009 11/1/20 1/1/2010 3/1/2010 5/1/2010 7/1/2010 9/1/2010
Investment in Infrastructure as % of GDP
IIP Growth
Source infrastructure.gov.in
Source Bloomberg

Key features of the mid term appraisal of XIth 5 year plan

Revised spending for the XIth plan remains approximately at the same level as that planned originally at Rs.20.5 trillion
Telecom sector to have increase of 34% over XIth plan Robust growth in subscriber base led to better than expected spending by the private sector
Airports sector to have increase of 17% over XIth plan Both public and private investments in airports are likely to increase compared to the investment projected at the beginning of the Eleventh Plan
Source Source -infrastructure.gov.in
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Opportunities in Key Sectors In Brief

Power Shortages keep returns buoyant
Initial target for capacity addition during XIth Plan was 79 GW which was revised to 62GW & expected target for capacity addition for XIIth Plan is 100 GW. 80% of this to be coal-based thermal plants ( NTPC, RPower, Adani will account for ~61GW capacity over this period ) A major initiative in addition to power generation capacity is the programme of Ultra Mega Power Projects (UMPPs). So far, 4 UMPPs of 4,000 MW each have been awarded on the basis of competitive tariff based bidding
Particulars Capacity as on 31st March 07 XIth Plan revised target Likely installed capacity as on 31st March 2012 Capacity (MW) 124569 62374 186,943
Sectors mentioned are not recommendations from the AMC or its associates.
Source www.planningcommission.nic.in
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Roads Significant project awarding ahead

Revision of targets by Government to INR 2.78 Trillion from INR 3.14 Trillion originally planned NHAI plans more than 37,000 km over the 5 year period from 2010 to 2014 For the remaining part of the XIth plan period the Government targets to build 20 km of highways per day, a 3X step up in road construction activity from the 7.3 km / day achieved in FY2010 For FY 2011 the expenditure planned stands at Rs.35,680 crore against Rs.29,934 crore for FY 2010, growth of 19%
Source www.planningcommission.nic.in
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Railways Insufficient capacity to trigger investments

Total investment of Rs.2 trillion for the XIth plan is twice the anticipated 10th plan expenditure Some of the targets set by the ministry for 2011 include 1019 km of new lines 944 MT of freight against 888 MT achieved in 2010. Spend on MRTS project targeted at Rs.1002 crore against Rs.581 crore for 2010 Procurement of 18000 wagons against 13500 wagons targeted for FY 2010 Opportunities for the private sector exist in freight corridor ,railway station modernization and privatization, development of logistic parks& MRTS projects Major companies operating in this segment include - L&T, Texmaco, BEML, Kalindee Rail, Reliance Infrastructure.
Source www.Planningcommision.nic.in
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Irrigation State finances to determine the spend

The government Targets 140 million Hectares as against current status of 87.2 million Hectares by the end of the XIth plan period as area under irrigation Total investment during the plan period amounts to Rs.2533 billion (at 2006-2007 prices) Andhra Pradesh to remain the irrigation hub of India with its massive irrigation development drive. Close to 50% budgetary allocation towards irrigation development The state governments spend on irrigation has increased at a CAGR of ~40% over FY05 Y09 For FY10. AP Government has set aside Rs 178 billion for irrigation works for FY10. Under Jalayagnam, the AP governments flagship programme for the irrigation sector, 86 pojects have been approved since 2004 with a total cost of Rs 1,760 billion . Major companies in this segment include- IVRCL, Patel Engg, HCC, etc.
17

Telecommunication
India has the second largest Telecommunication market in the world with over 706 million telephone connections at the end of August 2010 The spend on the telecom sector has been revised upwards for the XIth plan period by 34% to Rs.3.5 trillion. Most of the targets set for the XIth plan period has been achieved already such as reaching 600 million subscriber base. As against target of 100 million rural telephone connections by 2010, 175 million have been already achieved Provide broadband connection on demand across the country by 2012.Total number of Broadband connections has already reached close to 8 million
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Now Private sectors also coming to infrastructure building

The private sector contribution in the infrastructure spending during the revised XIth 5 year plan stands at 36% against the earlier estimated 30% and 25% contribution reported during the Xth 5 year plan The private sector contribution during the XIIth 5 year plan is estimated to be 50% of the total infrastructure spending i.e. over Rs. 20 trillion
Total of 937 projects involving an investment of Rs. 7.2 trillion are at various stages of award and implementation. Out of these, 241 projects with an investment of Rs. 66,512 crore have been completed and 292 projects with an investment of Rs. 2.4 trillion are under implementation. Another 404 projects involving an investment of Rs. 3.8 trillion are in the pipeline
19

Contd..
Various areas in which PPP model has been applicable include the following
National Highways State Highways Operation & Maintenance of Highways National Highways (Six Laning) Urban Rail Transit Systems Non-Metro Airports Re-development of Railway Stations Procurement-cum-Maintenance Agreement for Locomotives Transmission of Electricity
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Increase of private sector share in spending to double from 25% to 50 %
* Source Motilal Oswal Report Sept 2010
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Investment Objective
The scheme seeks to generate capital appreciation by investing predominantly in equity and equity related instruments of companies in the infrastructure sector
Asset Allocation
Maximum Allocation Type of Security to the Corpus (%)
Equity and equity related instruments (including equity derivative instruments) Debt and Money Market Instruments* 35 0 Low to medium 100 65 Medium to High
Minimum Allocation to the Corpus (%)
Risk Profile
*Investment in Securitized debt, if undertaken, would not exceed 35% of the net assets of the scheme.
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Investment Strategy
A top down view will be formed to identify sectors within the infrastructure space which present the most attractive investment opportunity Within each sector, individual stocks would be identified based on their present status and future earnings potential to provide investors with an optimum risk adjusted long term return The fund will not have any market capitalization bias.
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Scheme Key Features

Open Ended Fund w.e.f. September 27, 2010 Minimum Investment Rs. 5000 and in multiples of Rs. 1 Dividend and Growth options available Dividends will be completely tax-free. Long term capital gains to be completely tax-free. Short term capital gains to be taxed at 15% (plus applicable surcharge and cess) Entry load NIL Exit Load 1 % if redeemed before 1 year of investment. SIP/SWP/ STP facilities available Min SIP amount Rs 1000. Benchmark S&P CNX Nifty Index
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Portfolio Allocation (%)

14.86 13.93 11.69
7.62 6.62 5.13 5.08 4.69 4.30
3.61
3.42
2.76
2.68
2.23
2.17 0.98
As on Dec 31, 2010
27
Legacy of L&TMutual Fund Mutual Fund Legacy of L&T

L&T Finance took over DBS Chola Mutual Fund in February 2010 The entire management team was retained The team includes an 11 member investment team and total staff strength of over 314 members. Chola Mutual fund was launched in 1996 and has been in existence for 14 years before the takeover. The AMC is head quartered in Mumbai since 2000 The Fund got rechristened as L&T Mutual Fund on Feb 16, 2010 The Fund House has a suite of 22 products with some funds with a track record built over last 14 years. (L&T Triple Ace Fund)
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Legacy of L&T Mutual Fund
Legacy of L&T Mutual Fund
Over 96 Man Years of Investment Management experience Employee asset base of over 64% Post Graduates of which many are MBAs, CAs, CS & CFAs Suite of Mutual Fund schemes for different investor requirements Houses the first ever launched AAA rated debt fund LTMF Triple Ace Fund and Multi Cap Equity Fund in the industry. Awards over the years for performance of schemes Led by Sanjay Sinha, CEO one of the respected Fund Managers in the country
Past Performance may or may not be sustained in the future & is no guarantee of the future results
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Investment Philosophy Philosophy Investment
Provide long term gains to investors through strong research based stock selection and active portfolio management
30
Investment Process
Quantitative Analysis Fundamental Analysis Select Stocks Portfolio Construction Create watch list of Stocks based on Liquidity, Ownership pattern and Market capitalization
Identify fundamentally sound companies based on Management quality, Competitive position and Valuation parameters viz. RoE, RoCE, PE, PEG, EV/EBITDA.
Based on the fundamental analysis and identification of valuation gaps and reasons thereof. Sector weight allocation and stock weight allocation across sectors Inter sector and Intra sector rotation based on opportunity and relative valuation Evaluating portfolio performance to identify performance gaps and initiating actions accordingly
Calibrate Attribution Analysis
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Research Flow
Research Flow
Evaluate all secondary research inputs Company management/plant visits.
Obtain relevant primary inputs from other business associates like bankers, vendors, customers, etc) Ascertain sustainability of Business model Apply fundamental research tools for financial projections/valuation model Rating recommendation/ Ranking
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Decision Making Process Decision Making Process
Analysts propose action on a stock/sector Investment team evaluates the proposal based on risk return score for individual stock/sector for its inclusion/exclusion. Fund manager decides on stock weight age (overweight/underweight/neutral) in the portfolio Investment committee meets on fortnightly basis to review the sector/stock performance vis a vis the markets and decides on future course of action
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Researching 163 Stocks Across Sectors
AUTO
CHEMICAL
HARDWARE
MINERALS/MINING
PHARMACEUTICALS
TELECOM SERVICES
AUTO ANCILLARIES
CONSTRUCTION
HOTELS
NON - FERROUS METALS
POWER
TEXTILE PRODUCTS
BANKS
FINANCE
GAS
INDUSTRIAL CAPITAL
SUGAR
TELECOM ACCESSORIES
CEMENT
PETROLEUM PRODUCTS
OIL
INDUSTRIAL PRODUCTS
TELECOM - EQUIPMENT
TRANSPORTATION
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About L&T
Set up in 1946 by Henning Holck-Larsen and Soren Kristian Toubro & Others A USD 9.8 Billion organization (Annual report 09-10). 3 Major Business divisions - Engineering & Construction, Electrical & Electronics and Machinery & Industrial Products No. of employees 38,785 (Annual report 09-10) No of share holders 814,678 (Annual report 09-10) Net worth - Rs.18,312 crore (Annual report 09-10) Manufacturing facilities in 8 countries including India
Source: Audited Balance Sheet
35
L&Ts Presence In Various Sectors
L&T
Engineering & Construction
Heavy Engineering
Construction
Electricals & Electronics
Machinery & Industrial Products
L&T Infotech & Technology Services
Financial Services
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Branches
Ahmedabad: 9898029991, Allahabad: 9918500388, Amritsar: 9855721024 Bengaluru: 08042497000/32952142, Baroda: 8128997153, Bhopal: 0755-2552452-53/9893654246, Bhubaneshwar: 9937062565 Chandigarh: 0172 3068051 / 9878406940, Chennai: 04466881190 / 98400 96828/ 9003072863, Cochin: 0484- 6533130/ 9895168160, Coimbatore: 0422 4504047- 48 / 9994997599, Durgapur: 9932241935, Goa: 0832 2422720/ 9923285799, Gorakhpur: 8090482796 Hyderabad: 040 64557001/9849523638, Hubli: 0836 -4264140/ 9663383659 Indore: 0731 4286032 / 9826012555, Jaipur: 0141 4043108/4043101/9950852103, Jalandhar: 9872838208, Jammu: 9419845915, Jamshedpur: 9334289963, Kanpur:98392-96100, Kolhapur: 0231 6614834-5/9923539066, Kolkata: 033- 66262709/10/ 98315 00225, Lucknow: 0522 4003245 / 3052460 / 098381 19887, Ludhiana: 0161 5029019 / 9878114700, Madurai: 9865966013, Mangalore: 0824-2443609/9663027893 Mumbai: 022-61366600 / 6115 5503, Nagpur: 0712 6621511 / 9372695617, Nashik: 0253 6611791 / 6619211/ 9960025000, New Delhi: 011 49533301-02, Pune: 020-32912911/ 25510468, Raipur: 0771 4224107 / 9926808555, Rourkela: 9437648485, Siliguri: 0353 2545474/ 9800202292, Varanasi: 9839165055 Vijaywada: 9676785656, Vishakhapatnam: 0891 6620401/9676970777, Trichy: 9952142228 , Trivandrum: 9605601122, Rajkot : 0281 -2480131
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Contact Us @
Toll free : 1800-209-6565 SMS LTMF to 567678 www.LNTMF.com
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Disclaimers
Disclaimers: The presentation (including market views expressed herein) is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. Investments in mutual funds and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing. Recipient of this presentation/ information should understand that statements made herein regarding future prospects may not be realized. He/ She should also understand that any reference to the securities/ sectors in the document is only for illustration purpose and are NOT stock recommendations from the Author or the AMC or any of its associates. Any performance information shown refers to the past should not be seen as an indication of future returns. The value of investments and any income from them can go down as well as up. Statutory Details: L&T Mutual Fund has been established as a trust under the Indian Trust Act, 1882 by L&T Finance Limited, Sponsor/ Settlor (liability restricted to the seed corpus of Rs. 1 lakh) with L&T Mutual Fund Trustee Limited as the Trustee Company and L&T Investment Management Limited as the Investment Manager. Risk Factors: All investments in mutual funds and securities are subject to market risks and the NAV of the Scheme of the Fund may go up or down depending upon the factors and forces affecting the securities market. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including the possible loss of principal. Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future performance of the Scheme. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond the initial contribution of Rs. 1 lakh made by it towards setting up the Fund. The Scheme do not in any manner indicate either the quality of the Scheme or its future prospects and returns; and is only the name of the Scheme. There can be no assurance that the objectives of the Scheme/ Fund will be achieved. Scheme specific risk factors: Investment in the Scheme shall be subject to various risks including but not limited to risk associated with: Investment in Equity and Equity Related Instruments & Debt Securities such as Performance Risk, Credit Risk, Reinvestment Risk, Interest Rate Risk, Investment in Derivatives, Securitised Debt, etc. Please read the Scheme Information Document and Statement of Additional Information carefully before investing. Investment objective and classification: L&T Infrastructure Fund (an open ended equity scheme): To generate capital appreciation by investing predominantly in equity and equity related instruments of companies in the infrastructure sector. Load Structure: Entry Load Nil. Exit Load - 1% if redeemed 1 year; Nil - if redeemed > 1 year. Terms of Issue: Units of the Scheme are being offered at NAV based prices, subject to the prevailing loads. The AMC calculates and publishes NAV and offers for sale, redemption and switch outs, units of the Scheme on all Business Days, at the Applicable NAV of the Scheme. L&T Finance Holdings Limited (indirect Holding Company of L&T Investment Management Limited) is proposing, subject to market conditions and other considerations, to make a public issue of securities and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of SEBI at www.sebi.gov.in and the respective websites of the Book Running Lead Managers at www.jmfinancial.in, http://www.online.citibank.co.in/rhtm/citigroupglobalscreen1.htm, http://www.hsbc.co.in/1/2/corporate/equities-global-investment-banking, http://www.barclayswealth.com/indiaofferdocuments.htm, http://www.credit-suisse.com/in/ipo/ and www.equirus.com. Investors should note that investment in equity shares involves a high degree of risk and for details relating to the same, see Risk Factors in the aforementioned DRHP.
39
THANK YOU
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LT Infrastructure 012011

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L&T Infrastructure Fund

(An Open Ended Equity Scheme)

L&T Infrastructure Fund

L&T Infrastructure Fund

Size of Infrastructure Sector in India

Source Source -Infrastructure.gov.in

L&T Infrastructure Fund

Size of Infrastructure Sector in India

L&T Infrastructure Fund

Infrastructure sector has not participated in recent rally

BSE Health Care

BSE OIL & GAS

S&P CNX Nifty

Source -NSE , BSE as on 3-Jan-2011

L&T Infrastructure Fund

L&T Infrastructure Fund

Why Infrastructure Push Now ?

Source - Business world & Reuters.

L&T Infrastructure Fund

Infrastructure sector has delivered returns in long term

BSE Health Care

BSE OIL & GAS

S&P CNX Nifty

Source -NSE , BSE as on 3-Jan-2011

L&T Infrastructure Fund

L&T Infrastructure Fund

Figures for projected spends on XIth plan

L&T Infrastructure Fund

Figures for Revised spend on XIth & estimated XIIth plan

An Open Ended Equity Scheme

L&T Infrastructure Fund

Investment in Infrastructure as % of GDP

L&T Infrastructure Fund

Key features of the mid term appraisal of XIth 5 year plan

Source Source -infrastructure.gov.in

L&T Infrastructure Fund

Opportunities in Key Sectors In Brief

L&T Infrastructure Fund

Roads Significant project awarding ahead

L&T Infrastructure Fund

Railways Insufficient capacity to trigger investments

L&T Infrastructure Fund

Irrigation State finances to determine the spend

L&T Infrastructure Fund

L&T Infrastructure Fund

Now Private sectors also coming to infrastructure building

L&T Infrastructure Fund

L&T Infrastructure Fund

L&T Infrastructure Fund

L&T Infrastructure Fund

Increase of private sector share in spending to double from 25% to 50 %

* Source Motilal Oswal Report Sept 2010

L&T Infrastructure Fund

Minimum Allocation to the Corpus (%)

L&T Infrastructure Fund

L&T Infrastructure Fund

Scheme Key Features

L&T Infrastructure Fund

Portfolio Allocation (%)

7.62 6.62 5.13 5.08 4.69 4.30

As on Dec 31, 2010

Legacy of L&TMutual Fund Mutual Fund Legacy of L&T