The infrastructure opportunity in India is a multi-decadal opportunity. Given the large demand for roads, ports, social infrastructure, etc., the scope for growth in this sector continues to be unabated.

Also, given the continued focus by the government on infrastructure development to sustain growth, notwithstanding short-term blips, this sector will continue to demonstrate momentum over the longer term.

ICICI Prudential Infrastructure Fund was launched in 2005 to take advantage of the expected boom in the infrastructure space, a prerequisite to ensure growth momentum.

What are the key industries within infrastructure that hold potential from a market perspective? There are not too many listed players in the space other than those focused on roads, power and irrigation…

There are limited stocks in the port and railway sectors, consequent to which we have identified opportunities in sectors such as oil and gas, telecom and power utilities in view of the substantial rally in the market. ICICI Pru infrastructure is a theme fund that invests across infrastructure and allied sectors, thereby increasing the universe for investments and facilitating better portfolio construction.

Your exposure to cement appears low despite being positive on infrastructure growth. Are you being cautious?

Cement is a cyclical sector. While the sector continues to witness momentum, there has to be a cyclical dip in this secular sector, given the earlier rally, and we have positioned our stocks accordingly on expectations of a change in this cycle.

Is there a clear revival in capex-driven industries? Will capital goods find a higher allocation in your fund in future?

The three most important parameters for capex-based industries is availability of equity, debt availability and execution bottlenecks. Equity for infrastructure development was already present in the system.

The concerns were on the debt funding side, execution and speed to delivery. On the debt side, the government’s decision in this year’s Budget to provide IIFCL the option (in consultation with banks) for ‘take-out financing’ can be used to effectively address the asset-liability mismatch of commercial banks arising out of financing infrastructure projects. This is a positive step for infrastructure financing.

On the execution side the Cabinet Committee set up by the government post-Budget to expedite infrastructure projects provides the necessary comfort. Hence, going forward the capex space could witness increased participation, especially in its contribution to the infrastructure space.

Your exposure to the petroleum and banking sectors is rather high? Is this a more long-term view?

We take decisions based on valuation and growth opportunity. We looked at petroleum and banking sectors in view of the relative valuations among the sectors that constitute the infrastructure space before deciding on the extent of exposure. However, we also trimmed our exposure to banking when the valuation witnessed a run up.

It appears that your burgeoning asset size could be limiting your ability to quickly move between cash and equities? Has this been the case with your infrastructure fund in the current rally?

ICICI Prudential Infrastructure fund is a broad-based theme fund and the scope for portfolio construction continues to be large and spread across a wide range of infrastructure and allied infrastructure sectors.

Also the fund effectively uses high liquidity in Nifty and other derivatives sectors to increase portfolio manoeuvrability. This has thus helped it deliver consistent performance, irrespective of the fund size.

Theme funds typically require timing the entry and exit? Is this the case with the infrastructure space as well?

As mentioned, infrastructure as a theme holds tremendous long-term growth opportunity. Also it is not possible to time the market as there is risk of an opportunity loss while attempting market timing.

We recommend our investors invest in this theme fund through a Systematic Investment Plan. The infrastructure theme is a bet on the long-term infrastructure development expected in the country and, by that standard, it is necessary to invest with a long-term view and provide sufficient time for the theme to play out.

While theme funds should definitely form part of one’s investment portfolio, one should also invest in diversified equity funds for optimum portfolio diversification.

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