L&T Mutual Fund hopes to raise ₹150-200 crore through its newly launched Emerging Business Fund. The new fund offer will be open for subscription from April 22 to May 6.

The fund, which plans to invest in mid- and small-cap companies, will be close-ended for two years with automatic conversion into open-ended thereon. Investors have the option of starting a monthly systematic investment plan during the new fund offer.

Each monthly SIP investment will have a two-year lock-in.

Ashu Suyash, Chief Executive Officer, L&T Mutual Fund, said the two-year lock-in period provides an opportunity for the fund manager to build a stable portfolio by identifying companies that have the potential to grow their profit and revenue much faster than the broader market.

“The aim of the fund is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities,” she said.

The fund targets to invest in companies which have market capitalisation of less than ₹4,500 crore. It will focus on five distinct themes which includes farm products, digital and e-commerce, building products, auto components and media digitisation.

Drawing Eicher Motors as an example of an emerging company, Soumendra Nath Lahiri, Head of Equities, L&T Mutual Fund, said the profit of the company has risen to ₹525 crore in FY13 from ₹53 crore in FY07, while revenue has jumped nearly 3.5 times to ₹6,810 crore in the same period.

Interestingly, he said, ₹1 lakh invested in 2007 in Eicher would have delivered ₹20.62 lakh in FY13. “Historically, small-cap stocks have bounced back more strongly as compared to large caps after sluggish periods and they have significantly underperformed other segments of the market since last peak in 2008. Investors should look at this product with a five-year investment horizon,” he said.

L&T Mutual Fund currently manages ₹5,000 crore under its equity schemes.

(This article was published on April 21, 2014)
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