The Hindu Business Line : Infra funds flooding market

Mumbai, Dec. 11 If the number of schemes floated by mutual funds in the last three months is anything to go by, infrastructure-linked ones appears to be the flavour of the season for fund houses.

“In the last three months, about 15 new fund offers have collectively raised in excess of Rs 15,000 crore, including the expected collections in December. Another 15 are likely to be launched in the first three months of 2008,” said Mr Lokesh Nathany, National Head, Wealth Management, Almondz Global Securities, which markets many mutual fund schemes.

Funds raised through infrastructure schemes are likely to exceed Rs 20,000 crore in 2007 against Rs 2,500 crore in 2006. Eleven new funds were launched in November alone. SBI Infrastructure Fund launched in June raised more than Rs 2,500 crore. UTI Infrastructure Advantage Fund-Series-I, which is open for subscription till December 19, is expected to mop up Rs 4,000 crore according to sources connected with the scheme. Kotak World Infrastructure Fund, slated for closure on December 22, may raise a sizeable sum.

In September, Tata Indo Global Infrastructure Fund garnered close to Rs 2,200 crore. Indian mutual funds are allowed to invest $5 billion outside the country. In September, the Securities and Exchange Board of India hiked the overseas investment limit for individual mutual funds to $300 million.

“We are very positive. The creation of new infrastructure will reflect positively on the order book and the bottomline of the companies,” said Mr Sanjay Dongre, Fund Manager- Infrastructure, UTI Mutual Fund.

Good returns

Over the last one year, infrastructure funds have topped the return chart of customers and it’s no wonder that investors are latching onto anything that has an infrastructure tag to go with it.

Tata Mutual Fund’s Indian infrastructure fund posted a return of 66.66 per cent. ICICI Prudential followed with a 66.59 per cent return in the past one year. DSP Merrill Lynch’s Tiger fund and UTI’s infrastructure fund generated an annual return of 63.44 per cent and 60.44 per cent respectively. Four of top 10 diversified equity funds in 2007 were based on infrastructure.

The rush for infrastructure-based funds could be gauged from the fact that the Indian infrastructure sector will provide $520 billion ($226 billion) investment opportunity in the 11th Five Year plan ending FY 2012.

The government is to invest $158 billion in power, $80 billion in roads and bridges, $68 billion in telecom, $66 billion in railways, $57 billion in irrigation, $19 billion in ports, $9 billion in airports and $62 billion in allied sectors. “Rural infrastructure requires an investment of about 20 per cent of the total plan expenditure, while the creaking urban infrastructure needs an urgent overhaul,” said Mr Nathany.