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According to government estimates, there will be investments of around $500 bn over the next five years for enhancements in infrastructure like roads, ports and power.
By Aman Dhall & Dheeraj Tiwari, TNN |
Guess what was the title of a report published by a MNC bank in November last year, ‘450 bn reasons to invest in India’s infrastructure’. That’s the long and the short of the euphoria gathering around infrastructure stocks in 2007.
Companies such as GMR Infrastructure, Punj Lloyd, Jaiprakash Associate and Lanco Infratech posted more than 160% returns last year. In fact, Adani group’s Mundra Port and Special Economic Zone, which made its debut on the bourses at a premium of 75% in late November last year, posted a whopping 200% returns in just one month.
In 2008, this superhit movie is getting ready for its sequel, and this time it could be even bigger. Check out the script. According to government estimates, there will be investments of around $500 bn over the next five years for enhancements in infrastructure like roads, ports and power.
And companies such as JSW Energy, Sterlite Industries, Reliance Power and Essar Power are all set to come out with public issues to fund their expansion plans. Ramky Infrastructure, in fact, has already filed papers for its IPOs and plans to mop up Rs 400 crore from the primary market.
Other mega IPOs in the pipeline include Indus Towers, a JV between Bharti, Idea and Vodafone, and Reliance Telecom Infrastructure Ltd (RTIL). That’s not all, even PE players are looking to be a part of this build-up. Last year, out of $10 billion PE fund that India attracted, $5 billion came in real estate and infrastructure.
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And some of the major PE funds, which are active in Indian market, such as Temasek Holdings, Blackstone Group, Warburg Pincus, Carlyle Group, Washington and Actis Capital will also increase their share in infrastructure investments. With such a mega blockbuster on hands, as an investor you may feel star-stuck, but analysts advise caution. “Even though this sector is likely to see a lot of growth, whether the market valuation of all the infrastructure companies represent rea0l value or it is just a factor of the bull run needs to be seen in the future, especially when any correction takes place in the market,” says Vikas Vasal, partner, KPMG India.
Concurs, Amitabh Chakraborty, president, equity, Religare Securities, a Ranbaxy-promoter group company who feels that there could be a slowdown in contract opening due to elections in 2008. “We need to focus on companies which have developed strong presence and are diversified to take cushion for any slowdown in one segment,” he adds.
Chakraborty recommends Punj Lloyd, HCC and Gremach Infrastructure as good bets in the infrastructure space in 2008. If you want to play it safe, another interesting option is routing your investments through mutual funds. A report card of some of the infrastructure funds last year, Canara Robeco Infrastructure Fund (92.78%), ICICI Pru Infrastructure Fund (92.58%) and UTI Infrastructure Fund (72.57%), shows that for those not wanting to directly dabble in stocks, investment in mutual funds is not a bad idea.
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According to analysts, a sector-specific investment should be restricted to 20% to 40% of the total equity portfolio. “It depends on your risk-taking capacity and have to have a long term investment perspective in this sector,” says Chakraborty. Before you invest its pertinent that you look into the past performance and other key fundamentals of any company or mutual fund.Download
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