L&T Infrastructure Fund: Fund Review

L&T Infrastructure Fund performed better in the long-term than the short-term. It falls under a high-risk category. L&T mutual fund manager picks up those companies that have the potential to perform over time, good track record, scalable business, and strong balance sheets. Right now the prospects for the industry don’t look that great with the general elections round the corner but one can always rely on the infrastructure sector for a long-term. The future doesn’t look dull for the industry but will certainly have ups and downs as this industry is highly dependent on government and its policies.

Performance

L&T Infrastructure Fund performed better in the long-term. Being a sector fund, it falls under the high-risk category. In the last 10 years, the fund outperformed its benchmark 6 times by a close margin.

 

 

Within the category, the fund ranks highest in the 3-year return. It is one of the best performing funds in the category of infrastructure funds when the long-term returns are compared.

 

Fund1 Year Return (%)3 Year Return (%)5 Year Return (%)
L&T Infrastructure Fund-8.91%19.06%20.16%
Franklin Build India Fund2.54%17%22.65%
Kotak Infrastructure and Economic Reform Fund-7.47%12.19%17.17%
Tata Infrastructure Fund-5.4%13.12%15.11%
DSP India T.I.G.E.R. Fund-5.89%14.15%16.25%

 

A SIP investment of Rs 5,000 a month in L&T Infrastructure Fund started 7 years ago is worth Rs 7.18 lakhs now. A profit of Rs 2.98 lakhs (Rs 4.2 lakhs investment). If redeemed now, one will be liable to pay any taxes only on Rs 1.98 lakhs as gains up to Rs 1 lakh are tax-free.

 

 

Fund Information

L&T Infrastructure Fund invests in the infrastructure sector. The companies doing business in industries such as cement, real estate, energy, power, metal etc. are included in this sector. The fund looks at opportunities in the infrastructure sector. L&T mutual fund manager picks up those companies that have the potential to perform over time, good track record, scalable business, and strong balance sheets.

By identifying those companies that could benefit from the government’s push in infrastructure, construction projects, capital goods products, cement and beyond, there is a constant search for value creators over the long term. Thus the focus is to handpick only those stocks that have the potential to maximize the growth opportunities that could build wealth over time.

L&T Infrastructure Fund has 46 stocks which are actively managed. The fund invests only in the infrastructure sector. Within this sector, the industries are construction (37.58%), engineering (15.77%), energy (13.48%), metals (12.76%), communication (6.63%), and services (4.26%).

Sector Analysis

Infrastructure sector has become the biggest focus area for the Government of India. In 2019-20 interim budget a hefty sum of Rs 4.56 lakh crore has been allocated to the infrastructure sector. The sector has a high demand. An investment worth Rs 50 trillion is required by 2022 to have sustainable development in the country. There is immense scope for improvement in the country as only 24% of the national highways are 4 lanes. There is immense support from the government in terms of policies like ‘Housing for All’ and ‘Smart City Mission’. Also, 100% FDI is permitted for this sector.

Under the current government, the length of the highway increased from 92,851 km in 2014 to 1,22,434 km in 2018. India’s rank in ease of doing business has improved every year. India’s is the fastest growing economy in the world. All these have boosted the industry. All the policies taken by the government and all the achievements for India have already been accounted for in the stock prices of infrastructure companies.

Current Scenario

However, with the general elections right around the corner, there is uncertainty in the country. With no clear majority, it is difficult to predict who will come to power for the next term (2019-2024). The projects undertaken under the current government and the new projects to come will see some changes and uncertainties in the policies if a new government is formed. India is growing at a high growth rate now. But as the country grows it is difficult to keep up a similar growth rate. Also, going forward the country will see a dip in the growth rate affecting all the sectors, especially infrastructure.

Also, with most of the power and infrastructure companies being insolvent or on the verge of insolvency, the confidence of the investors has been shaken. The industry has been hit badly and the defaulting companies in the industry have increased leading to major corrections in the industry and market as a whole. Right now the prospects for the industry don’t look that great but one can always rely on the infrastructure sector for a long-term. In sectors like infrastructure, it takes a lot of time for the results to be seen. The long-term for this industry is longer than 10 years. The future doesn’t look dull for the industry but will certainly have ups and downs as this industry is highly dependent on government and its policies. Also, investing throughout the business cycle (7 years) is very important if one chooses to invest in infrastructure funds.

Recommendation

L&T Infrastructure Fund is suitable for high-risk investors. Invest only in this fund if you have knowledge about the sector. If one chooses to invest in this fund then investing throughout the business cycle (7 years) is important. Each sector has its own business cycle. Long-term for this fund (sector) is longer than 10 years. The fund accepts both lump sum and SIP investments. However, investing in L&T Infrastructure Fund through SIP is recommended. Do not look at the fund’s performance in the short-term as short-term returns are deceptive. Also, more than the entry the exit from the fund is very important. As the sector has its own business cycle, one needs to know when to exit the fund without losing out on the returns earned.

 

Fund NameL&T Infrastructure Fund
Launch DateSep 27, 2007
AUMRs 1,790 crore
Return (Returns greater than 1 year are annualized)Since Launch: 4.15%
1 Year: -8.91%
3 Year: 19.06%
5 Year: 16.03%
Expense Ratio2.19%
Fund Category RiskHigh
Investment PlanGrowth
Minimum Investment Horizon5+ years
Minimum InvestmentRs 5,000
Minimum Additional InvestmentRs 1,000
Exit Load1% if withdrawn within 12 months. No exit load if withdrawn after 12 months
Fund ManagerS.N. Lahiri
0 Shares:
Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like