Baroda Pioneer Infrastructure Fund

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3. 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
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4. 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
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5. 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
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6. 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.
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7. “Infrastructure” - The story unfolds
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8. 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
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9. 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
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10. 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
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11. 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
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12. 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
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13. Infrastructure - Opportunities exist across all verticals
• Power
• Roads & Bridges
• Railways
• Irrigation
• Airports
• Ports
• Oil & Gas
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14. Some case studies
Company Details FY – 2004 (Rs. mn) FY – 2009 (Rs.mn) 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
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15. Companies playing the infrastructure theme
Source: Internal Compilation
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16. Presenting
Baroda Pioneer Infrastructure Fund
NFO: 3 May - 31 May 2010
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17. 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*
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18. 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.
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19. 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.
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20. 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
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21. 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
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22. 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
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23. 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
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24. 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 www.barodapioneer.in/ 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: info@barodapioneer.in. Website: www.barodapioneer.in
Toll Free No: 1800 419 0911