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Infrastructure Fund Now an opportunity to also invest in Global Infrastructure
What has been the most popular investment theme in India in the past 5 years? What has been the most popular investment theme globally in the past 5 years?
A popular theme
Risk-return profile of five asset classes
Globally, Infrastructure as an investment theme offers superior risk return profile to other popular asset classes
India and the world
India’s economic growth is picking up momentum Indian stock markets have delivered good returns over the past few years However there are other economies which are also growing at good rates In a globalising world economy, portfolio allocation should also reflect this global opportunity Thus investing in [India + other growing economies] makes good sense What is the common link driving growth in various emerging economies?
Educated people + infrastructure + economic governance
What drives Infrastructure?
As populations grow and people become free As economies around the world are freed from shackles Natural growth forces start driving economic prosperity Early economic prosperity drives more aspirations People aspire for a better quality of life Companies aspire for higher and higher growth All this is possible only on the back of quality infrastructure
Success breeds success
Success stories of other countries is spurring infrastructure development everywhere Examples of Singapore / Dubai / China We see this in India all around us. This is also happening in other parts of the world
The above example is for illustrative purposes only. TIGIF may or may not invest in the said countries or sectors
What is Infrastructure?
People / Goods /services need to move more – Ports / Airports / highways / railways etc Corporate growth needs more power People want to communicate more – Telecom / IT / BPO etc People want better housing / water / Real Estate etc All this needs to be financed – Banks / Financial Institutions This story is the same in India and in many parts of the world
Global infrastructure – Driver of growth
Infrastructure - The engine of growth for India and for many other economies Sustainable economic growth over the long term requires investment in new infrastructure besides maintenance of existing ones Strong economic growth and increasing wealth among consumers is driving infrastructure investment globally. Higher incomes bring increased demand for a better quality of life, enhanced government services. Developed countries became competitive economies on the back of quality infrastructure
Developed countries became competitive economies on the back of good infrastructure
Higher investment in infrastructure is a must for an economy to become competitive & developed
Global Nominal GDP Growth (2004-14)
(Strongly correlated to infrastructure investment)
Source: Macquarie Research
GDP growth will drive demand for infrastructure investment. Sustainable growth can only be achieved through continued investment.
Asia Real GDP growth (YoY)
Region China India Korea Indonesia Taiwan Thailand HK Malaysia Singapore Phillippines Vietnam 2005 10.2 9.0 4.2 5.7 4.1 4.5 7.5 5.0 6.6 4.9 8.4 2006 10.7 9.4 5.0 5.5 4.7 5.0 6.9 5.9 7.9 5.4 8.2 2007E 11.2 9.4 4.6 6.5 4.5 4.0 5.0 6.0 7.0 6.2 9.0 2008E 10.6 9.6 5.5 6.8 5.5 5.8 4.4 6.2 8.0 5.6 9.4
Source: Credit Suisse estimates. Note: India's GDP growth is as per fiscal year; all else as per calendar year. The above example is for illustrative purposes only. TIGIF may or may not invest in the said countries or sectors.
Asia’s Capital Spending is driving growth
GROSS FIXED CAPITAL FORMATION AS % OF GDP
China & India – sustain at high levels
% of GDP 45 40 35 30
25 45 40 35 30
ASEAN – increase to support GDP growth
% of GDP
20 15 10
19 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 06
19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06
Asia ex-Japan Philippines
Source: Thomson DataStream, as at Apr 07 (latest available data)
“The infrastructure gap in India was holding back economic growth by 1.5-2% every year” P. Chidambaram, Finance Minister
“Growth in GDP is the main driver for investments in infrastructure.” Jack Hennessy, Baring Private Equity Asia
“Booming demand for infrastructure assets saw almost US$100bn raised globally to fund deals in the sector during the first half of 2006, a year-on-year increase of about 71%… Demand is being fed by the number of pension funds looking to infrastructure assets for stable, long-term returns that are higher than government bonds.” Financial Times, 19 July 2006
Infrastructure as an asset class globally
The infrastructure story exists in most growing economies of the world Low Risk and Volatility
Basic, difficult to replace, essential services Monopolistic / near monopolistic assets Inelastic demand / growing Low sensitivity to management – due to essential nature and high margins Strategic competitive advantage – provides pricing power Low capex requirements once asset is operational Physical, difficult to replace, long life assets Due to demand inelasticity and / or regulatory pricing regime
Strong cash flows
Long term returns
Favourable Macro Environment for Multi-year Growth
Modernisation & Upgrades Population Growth
Outsourcing e.g. efficiencies
Technology Shift e.g. digital & 3G network
Government spending Public demands e.g. environmental protection
The global opportunity
Source : World Bank
Global infrastructure investment needs until 2030 estimated at US$30tr for transport, energy, water, and communications infrastructure.
Infrastructure Value chain
Investment opportunities exist throughout the infrastructure value chain
Risk-adjusted returns on various asset classes for different time periods
Globally Infrastructure performed better over a longer period than most other asset classes
Significant diversification available
Global universe of listed infrastructure companies made up of approximately 700 companies capitalised at more than USD$4.0 trillion. There is significant diversification among countries and sectors
Development of Infrastructure Projects in emerging Asia
China Hong Kong
2007/08 financial budget planned for 40 new infrastructure schemes (~USD1.98bn). Feasibility study to construct bridge linking HK, Macau & Zhuhai across the Pearl River estuary costing ~USD3.8bn. The government plans to spend >USD12.9bn on 180 projects in Tibet by 2010 to improve the connectivity. These include road and water supply projects.
• The government will spend THB160bn (~USD4.6bn) on 3 new mass transit projects in Bangkok, with ~48% financed by the central budget & domestic loans and THB84bn from Japan Bank for Int'I Cooperation loans. Committed to PHP1.7 trillion (US$34bn) programme for 2006-2010. Infrastructure spending represents 4.45% of GDP. Power & transportation sectors are expected to benefit most.
Under the 12th Federal Budget, A$22.3bn to be spent on road, rail & ports over 2010-2015, in addition to the existing commitment of ~A$15.8bn. A$10bn over 10 years to sustain water supply.
The government invites private investment in a World Bank-funded USD44m water project in Ho Chi Minh City.
Source : Invesco. As of 31st May 2007. The above example is for illustrative purposes only. TIGIF may or may not invest in the said countries or sectors.
Some Global Infrastructure Investment Themes
Investment Theme 1: China – Water Treatment
China has 21% of the world’s population but only 7% of the renewable water supply. The total volume of freshwater resources is 2.8 trillion cubic metres (2,200 m3 per head), which is 31% of the world average. In a ‘normal’ year, China faces a water shortfall of 40bn m³. China has opened its water sector to foreign and private capital as to improve efficiency.
Private investment in water & sewerage projects in China
US$ Millions 1400 1200 1000 800 600 400 200 0 199119921993199419951996199719981999 20002001200220032004 2005
China plans to spend US$125bn* to boost urban water treatment from 52%* in 2005 to 70% by 2010
Source: Goldman Sachs Global Investment Research, World Bank, as at January 2006 (latest available data) •Source: Ministry of Construction, China, 2006 (latest available data), ASIANINFRASTRUCTURE-issue 147, May 2007. The above example is for illustrative purposes only. TIGIF may or may not invest in the said
Investment Theme 2: Airports
China: Number of airports increased from 142 to 186 by Year 2010 with total spending of US$17.9bn as CAAC forecasts passenger growth of 14% p.a. for 20062010 to 540m. India: Privatisation of Mumbai and Delhi Airports in 1Q2006. Will India follow China in boom in Air Travel?
Source: AsianInfrastructure, Issue 139, Civil Aviation Administration of China (CAAC), Macquarie, Jan 2007 (latest available data) . The above example is for illustrative purposes only. TIGIF may or may not invest in the said countries or sectors.
From the Group that has been among the pioneers in the Indian Infrastructure sector through Tata Infrastructure Fund
Tata Infrastructure Fund
Launched on November 29, 2004 First open ended equity mutual fund dedicated to infrastructure sector. Infrastructure has been the most popular investment theme since then What we said during the NFO has played out Disciplined, process-driven investment strategy. Patient, bottom-up stock picking.
Tata Infrastructure Fund Performance
(%) CAGR as on 31/07/07 Since Inception Tata Infrastructure Fund BSE SENSEX 51.58 39.37 Last 1 year 66.66 44.74
Date of Allotment : Dec 31, 2004. Past performance may or may not be sustained in future. Returns are given for growth option.
Benefits of investing in global listed infrastructure securities
These companies typically display a strategic comparative advantage, economies of scale & relatively inelastic demand, appealing to a broadening range of investor seeking:
stable returns low volatility stable earnings from essential services diversification across geographic regions, sectors & securities access to a unique & growing asset class diversification into infrastructure assets which often have long concession terms
An example of Prospective geographical distribution *
NB: * illustrative purpose only and subject to change. Kindly refer offer document for investment pattern. The investment universe outside India may evolve in the future based on emerging opportunities.
Tata Indo-Global Infrastructure Fund
Name, Nature and Investment objective: Tata Indo-Global Infrastructure Fund: A 3 years closeended equity scheme. Upon completion of 3 years, the Scheme will automatically be converted into an open-ended scheme, without any further reference from the Mutual Fund/Trustee/ Unitholders. The investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related instruments of companies engaged in infrastructure and infrastructure related sectors and which are incorporated or have their area of primary activity, in India and other parts of the world. Sale at Rs. 10/- per unit for cash at face value during the New Fund Offer. Minimum Investment Amount: Rs. 10,000 and in multiples of Re. 1 thereafter. Investment Pattern : Equity and Equity related instruments of domestic companies*: 65% - 85%, Foreign Securities* as permitted by SEBI/RBI: 15% - 35%, Debt and Money Market Instruments: Upto 35%. Two Options for Investment: Dividend Option and Growth Option. Applicable Load Structure & Repurchase facility: Exit Load: NIL NAV publication: Once every week i.e. on each Wednesday during close ended period and on all business days subsequent to the scheme's conversion into an open end scheme. Repurchase facility: First Wednesday of every month (immediately next business day if such Wednesday is a holiday) and on all business days subsequent to the scheme's conversion into an open-ended scheme. New Fund Offer Expenses not exceeding 6% of the amount mobilized will be charged to the Scheme and shall be amortized over a close ended period. In case of redemption before expiry of close ended period, proportionate unamortized NFO expenses will be recovered from the redemption proceeds of the investors. Investors are urged to study the terms of the Offer carefully and to consult their tax advisor at the time of investment and or redemption of units in the fund.
Statutory Details: Constitution: Tata Mutual Fund (TMF) has been set up as a Trust under the Indian Trust Act 1882. Sponsors: Tata Sons Limited and Tata Investment Corporation Limited. Trustee: Tata Trustee Company Pvt. Ltd. Investment Manager: Tata Asset Management Ltd. Risk Factors: l All investments in Mutual Funds and securities are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. l As with investment in stocks, shares and securities, the NAV of the Scheme can go up or down depending on factors and forces affecting the Capital Market. l Past performance of the previous schemes, the sponsors or its group affiliates are not indicative of and do not guarantee future performance of the Scheme. l The Sponsors are not responsible or liable for any loss resulting from the operation of the Scheme beyond the initial contribution of Rs. 1 Lac made by them towards setting up the mutual fund. l Investors in the scheme are not being offered any guaranteed or assured rate of return. l Tata Indo-Global Infrastructure Fund is only the name of the scheme and does not in any manner indicate either the quality of the schemes, its future prospects or returns. l Investment in foreign Securities in subject to various risks such as currency fluctuations, restrictions on repatriation, changes in regulations, political, economic and social instability and the prevalent tax laws of the respective jurisdictions. l For scheme specific risk factors and other details please read the offer document carefully before investing. l Copy of Offer Document and Key Information Memorandum along with application form may be obtained from the office of Tata Mutual Fund, Fort House, 221, Dr. D. N. Road, Mumbai 400 001 or at your nearest collection centres. *predominantly in companies engaged in infrastructure / infrastructure related sectors. (It also includes units of overseas mutual funds and exchange traded funds which invest predominantly in equity / equity related instruments of companies engaged in infrastructure sectors and infrastructure related sectors).