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PSU Fund

PSU Fund. Page 1. India’s Precious Stones Unearthed: Bharat Ratna’s. Get the PSU Advantage. Page 3. PSU: Powerful Presence. BSE 100 -Total market cap - Rs.42.6 trillion. Nifty - Total market cap - Rs. 32 trillion. BSE Sensex -Total market cap - Rs. 26 trillion.

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PSU Fund

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  1. PSU Fund Page 1

  2. India’s Precious Stones Unearthed: Bharat Ratna’s Page 2

  3. Get the PSU Advantage Page 3

  4. PSU: Powerful Presence BSE 100 -Total market cap - Rs.42.6 trillion Nifty - Total market cap - Rs. 32 trillion BSE Sensex -Total market cap - Rs. 26 trillion 9 out of 50 Nifty stocks are PSUs PSUs account for 35% i.e. Rs.14.7 trillion PSUs account for 29% i.e. Rs.9.3 trillion PSUs account for 26.5% i.e. Rs.6.9 trillion 6 out of Top 10 companies by market cap are PSUs (i.e. 60%)` Source: Bloomberg & Capitaline Page 4

  5. PSU:Surging Incomes • Incomes of Top 20 PSUs have grown at a CAGR of 17.2 % in last 10 years. • Income of Top 15 PSUs amounts to 20.6% of India’s GDP. NET INCOME • Net profits have grown at a CAGR of 17% in last 10 years. NET PROFITS • Dividend payout has been in the range of ~26.5%. DIVIDEND PAYOUT Source: Bloomberg & Capitaline Page 5

  6. PSU: Undisputed Leaders Virtual Monopolies NHPC SBI • PSU: Industry leaders in their respective sectors • PSU: In many businesses, PSUs are virtual monopolies page 6 Page 6

  7. Your Investment of Rs 1 Lac on 1st Jan 2001, would have become Rs. 10 Lacat BSE PSU Index as on 23rd Dec 2009. As on 23rd Dec 2009 PSU: Proven Wealth Creators BSE PSU Index – 10 xi.e. Rs. 10,04,463 Sensex – 4.5 xi.e. Rs. 4,33,801 Nifty – 4 x i.e. Rs. 4,07,154 Rs. 1,00,000 investment as on 1st Jan 2001 Source: Bloomberg Page 7

  8. PSU:Sharing Prosperity – Raining Dividends Source: Bloomberg & Capitaline Page 8

  9. PSU: Unbelievable Track Record – Robust Performancevis a visSensex & Nifty Contrary to General Perception…PSU companies have been the biggest wealth creators over the years BSE PSU Index which consists of 48 public sector companies has outperformed leading companies which are represented in the Sensex & Nifty Source: Bloomberg Page 9

  10. PSU: Perceived Inefficiency – Proven Ability to Competewith the Private Sector Source: Bloomberg, Annual Report & Capitaline Page 10

  11. PSU: Strong Fundamentals Page 11

  12. PSUs as a basket, trade at discount in relation to the broader market • On a like to like basis PSU companies in most cases trade at a discount to private sector peers PSU: Unleashing of Potential Re-rating Valuation Gap PE Multiple Across Segment 23.2 20.5 15.9 Source: Bloomberg & Capitaline page 12 Page 12

  13. PSU: Peace of Mind Downturns… BSE PSU vsSensex 160 140 120 100 80 60 40 20 0 Sep – 08 Oct – 08 Nov – 08 Dec – 08 Jan – 09 Feb – 09 Mar – 09 Apr – 09 May – 09 Jun – 09 Jul – 09 Aug – 09 Sep – 09 Oct – 09 Nov – 09 Business Line Source: Bloomberg Page 13

  14. PSU: Safe & Secure BSE PSU Index has outperformed leading companies which are part of the Sensex in both short term and long term • BSE PSU Index has done well vis avis Broader Indices: • In a Falling Market i.e 2008 • In an Upbeat Market i.e 2009 Source: Bloomberg Page 14

  15. PSU: Unparalleled Resilience Proven Resilience in Economic Downturns Source: Bloomberg Page 15

  16. PSU: Privatization – Icing on the Cake On the cusp of the third major Disinvestment initiative… Pranab Mukherjee, in his budget speech said “The average public float in Indian listed companies is less than 15 per cent. Deep non-manipulable markets require larger and diversified public shareholdings. This requirement should be uniformly applied to the private sector as well as listed public sector companies. I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies.” • Government could raise more than US$160bn from divestment • To reduce holding as per norms by the Indian Capital Market Regulator • Divestments of around US$4-5 billion (estimated) in FY2010 • Privatisation of companies could lead to wealth creation Page 16

  17. Improved accountability • Faster adaptability & proactiveness • Openness to private sector management practices • Better compensation structure • Improvement in Productivity and efficiency PSU: Stock Relating Post Privatisation Source: Bloomberg Page 17

  18. PSU: Unrealized Opportunity Candidates for divestment as the average government shareholding is more than 75% Source: Bloomberg & Capitaline Page 18

  19. PSU Privatisation would help increase weightage in the Broader Indices • Higher allocation would lead to better Valuation and Re-rating of Companies PSU: Potential Scope for Unlocking Value Source: Bloomberg & Capitaline Page 19

  20. Why PSU Fund? Page 20

  21. Why PSU Fund: Positioning & Size Unchallenged Page 21

  22. Why PSU Fund: Proven, Scalable and Undervalued Page 22

  23. Aviva PSU Fund Page 23

  24. Aviva: PSU Fund Participate in this Stupendous & Unique Opportunity Page 24

  25. Fund Objective: To generate capital appreciation by investing in equity and equity related instruments of public sector undertakings (PSU) where the Central / State Government has majority shareholding (more than 50%) or the management control is vested with the Central / State Government. • Benchmark:BSE PSU Index • Proposed Asset Allocation: • Investment in Equities of PSU Companies : Upto 100% • Debt Securities & Money market instruments : 0% - 100%* Aviva: PSU Fund * Only in Exceptional circumstances Page 25

  26. Aviva: PSU Fund – A Great Investment Opportunity Page 26

  27. Aviva: PSU Fund – Investment Approach Page 27

  28. Aviva: PSU Fund • An Opportunity to invest in the • Crown Jewels of India • PSU are currently available at reasonable valuations compared to broader markets • The expected re-rating of these companies in future in the event of disinvestment • Government focus on divestment of stake in listed companies • High dividend yield • Lower volatility • High quality companies with dominance in market share and Lower cost structure • Strong Financials with Huge cash and Investments • A Great Business Model with Leadership in their segment or a Virtual monopoly • PSUs are core to the India Growth Story Page 28

  29. Aviva: Infrastructure Fund Investing in India’s Growth Story Page 29

  30. The Biggest Bottleneck for India’s fast paced growth: Crumbling Infrastructure: In urgent need of development… India’s Infrastructure: A Big Constraint to Growth • Roads: Choked even before a million Nano’s a year are added, full of potholes. • Power: Half of India , 60 Cr people don’t have access to electricity • Airports: The creaking of its four main airports is almost audible. • Ports: Avg 21 days to clear import cargo in India; in Singapore it takes just 3 days. • Urban Infrastructure: Mumbai has 17m inhabitants, half of whom live in slums. The city’s commutation and communication network is overloaded and clogged up • Railways: Rail network is overloaded, It still reminds you of early 20th century Page 30

  31. History Says Infrastructure: The Key Growth Enabler • The goal of long term sustainable economic growth is not achievable unless infrastructure improves. • The transformation of many countries was preceded and reinforced by substantial investments in physical and social infrastructure • Japan, Hong Kong, the Republic of Korea, Singapore, Thailand, Malaysia, and China • Infrastructure spending boosts output and jobs & lifts productivity • Better income levels lead to demand for better infrastructure – power, sanitation, transport and communication • Thus creating a virtuous cycle of investment and growth Page 31

  32. India’s Infrastructure: Opportunity in Adversity Page 32

  33. India’s Opportunity: Ten Year Vision XI & XII plan (2007-17) investment in the order of US$ 1350 billion, which is more than what we have put in last sixty years • Indian infrastructure sector is at an inflection point • Investment projected in the XIth Plan is around 2.5 times achieved during the Xth Plan • Total Investment in infrastructure during the Eleventh Plan is projected at US$ 450 billion (7.5 % of GDP) over the Plan period vis a vis US$ 190 billion for Xth plan. • There would be another mammoth investment during the Twelfth Plan 2012-17 to the tune of US$ 900 billion. Page 33

  34. Performance:Score Card CNX Infrastructure Fund Return in last 5 Years Vis a Vis Other leading indices In last 5 Years, the infrastructure theme has played out better than the broader market Page 34

  35. Fund Objective: To Invest in equity and equity related securities of companies engaged directly or indirectly in the infrastructure growth of the Indian economy. • Proposed Asset Allocation: • Investment in Equities of Infrastructure Companies : Upto 100% • Debt Securities & Money market instruments : 0% - 100%* Aviva: Infrastructure Fund * Only in Exceptional circumstances * Only in Exceptional circumstances page 35 Page 35

  36. Aviva: Infrastructure Fund • An Opportunity to participate in India’s Growth Story • Government focus on infrastructure to benefit the segment and related companies • High Growth Visibility thanks to strong order book • High quality companies with Lower cost structure • Potential to become transnational companies • Strong Financials with Huge potential • A Sound Business Model with great Leadership in their segment • Infrastructure companies are core to the India Growth Story Page 36

  37. Aviva: Infrastructure Fund – Benefiting from Your Need • The Indian Economy needs to grow at 7-8% plus rate over the next decade. • Govt. thrust on Infrastructure is only way forward to achieve this • Huge spending unveil can translate into long term growth of companies in the infrastructure sector. • Accelerating growth in Infrastructure will lead to creation of value amongst infra companies. • We all have seen this in other developed economies and in India in last 5 Years. As an investor and user of these services participate in Infrastructure creation and create value for yourself with Aviva Infrastructure Fund Page 37

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