5 top mutual fund houses

In 1994, the entire MF industry in the country managed assets of about Rs25,000 crore, with almost all of it in closed-end funds. Compare this with the volumes today: with around 3,500 funds (and over 10,000 plans), hacking through the thicket of near-identical funds is a daunting task. We profile the top 5 fund houses, their strategies and key drivers

Leveraging the brand

BIRLA SUN LIFE MF

BIRLA SUN LIFE MF (Graphics)

Despite having been around for about a decade, the variables in its favour—brand name, product range, performance and partnership with Sun Life—were not reflected in its scale of business. Hopefully, that is changing as this asset management company is now one of the fastest growing players.

Though it boasts of a distribution network of 120 branches across India, with 2.4 million customers, equity assets (which predominantly come from the retail base) still form a very small portion of overall assets. The retail component in the fixed-income basket is around 40%. Now the fund is working on increasing penetration across the country and brand-building.

Over the past 12 months, it has done well on the equity side. Exactly a year ago, of the 14 Birla Sun Life MF funds which boasted of five-star and four-star ratings, just one was an equity offering—Birla Sun Life Equity. This time, their list has five equity funds and two hybrids (a monthly income plan and an equity-oriented balanced fund).

Since: December 1994

TOTAL ASSETS: Rs63,075 cr

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Star performer

HDFC MF (Graphics)

One of the fund industry’s sturdiest shops, HDFC Mutual Fund has historically been a consistent outperformer. In fact, in 2008 all its four schemes—HDFC Equity, HDFC Growth, HDFC 200 and HDFC Taxsaver—fell much less than the category average.

This year, they have once again proved their merit.

This asset management company has witnessed some phenomenal growth in the past year. Its market share has actually gone up from 9.9% (August 2008) to 12.53% (August 2009). In the second half of 2008, HDFC Mutual Fund overtook ICICI Prudential Mutual Fund as the second largest fund house in the country in terms of assets under management.

When one looks at the composition of assets, it’s worth noting that the growth has come from money going into the liquid and liquid-plus segment. In September 2008, the fund house had 28% of its assets in equity and 39% in cash. A year later, the equity component has dropped to 21% while cash has zoomed to 70.32%.

Since: June 2000

TOTAL ASSETS : Rs90,427 cr

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Prolific player

ICICI PRUDENTIAL (Graphics)

Over the past decade, it has not limited itself to fixed maturity plans (FMPs). Though it does have a fairly good spread on the equity side, the fund house is known for its huge fixed-income business. The ICICI Prudential Flexible Income Plan, for instance, has assets of Rs32,858 crore and ICICI Prudential Liquid Fund had Rs20,825 crore of assets under management (as of September). Its gilt offerings are excellent. In the medium-term debt category, its best funds are ICICI Prudential Income Plan and ICICI Prudential Long Term Regular, though the latter hit a rough patch last year and underperformed the category average.

Its liquid funds now have almost 30% of the assets in instruments with very high liquidity.

ICICI Prudential Infrastructure and ICICI Prudential Dynamic are its best offerings. ICICI Prudential Tax Plan was a category underperformer over the past few years but has been doing very well recently. Ditto for ICICI Prudential Discovery, whose performance has impressed this year.

Since: August 1993

TOTAL ASSETS: Rs80,149 cr

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High roller

RELIANCE MUTUAL FUND (Graphics)

This fund has a history of sporting huge corpuses. In fact, the firm’s culture places a premium on running a big fund. Thanks to very aggressive distribution, marketing and brand management, it has managed to rope in the money. In all fairness, though, credit also needs to be given to performance and the wide asset mix.

Its first two equity funds, Reliance Vision and Reliance Growth, put it in the limelight in 2002 and 2003. Their performance was smartly leveraged, along with the Reliance brand, to gain investor attention. It worked and Reliance Mutual Fund became India’s largest private sector MF in 2006 and the largest fund the next year. The fund went on to create history by mopping up Rs2,700 crore for the new fund offering (NFO) of Reliance Equity Advantage NFO (2007) and Rs5,660 crore for Reliance Natural Resources Retail NFO (2008).

While some schemes may perform better than others, the fund has never really had a disaster with any of its offerings. A bone of contention has always been the huge size of the corpus.

Since: June 1995

TOTAL ASSETS: Rs118,251 cr

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Comeback kid

UNIT TRUST OF INDIA MF (Graphics)

In 2003, Unit Trust of India was split into two—UTI Mutual Fund and Special Undertaking of UTI, which housed all the assured return schemes. After the bifurcation, UTI MF was left with less than Rs14,500 crore of assets under management, but was still the largest fund in the country. Now it is down to the fourth position. Interestingly, this slippage in order is not due to the shrinking of UTI’s asset base, which has been robust. It’s simply that its growth has been slower than that of its peers.

Its best performing equity funds are UTI Infrastructure, UTI Opportunities and UTI Dividend Yield. The Transportation and Logistics Fund, which was the earlier auto sector fund, has been delivering fabulously this year. On the fixed income side, its best performers are UTI Money Market Mutual Fund and UTI Floating Rate ST Regular, and its debt-oriented hybrid fund.

UTI Mutual Fund has the largest investor base, a massive distribution network and is one of the most profitable fund companies in the country.

Since: February 1964

TOTAL ASSETS : Rs73,589 cr

The MF industry seems to be on a recovery path after the losses in September. The industry registered an increase in assets as the money coming into funds increased substantially. Investors added to its coffers by as much as Rs1,41,291 crore, resulting in a percentage change, over September, of 22.50%. However, there is a flip side to this. Open-end income schemes and gold exchange-traded funds (ETFs) were the only two categories that registered inflows, while all other categories registered outflows. Open-end income schemes, which registered inflows of Rs1,49,957 crore, thus went up by 52.35%.

A comeback for Arbitrage funds

Arbitrage funds may just have made a comeback. At least that is the signal Kotak Asset Management Co. Ltd is sending by reopening the door to fresh investment in its arbitrage fund. The trend may well be set for their return as these funds thrive in a volatile stock market environment—the higher the volatility, the higher the chance of mis-pricing of stocks in the spot and derivatives markets. This works especially in a bull market. Arbitrage funds stop fresh inflows if they see opportunities dwindling or if the fund size becomes too large, which prevents the fund manager from optimizing returns.

Fidelity India Value Fund from Fidelity MF

Fidelity MF has launched Fidelity India Value Fund, an open-end diversified equity fund. It will invest in Indian and international equities, with special emphasis on undervalued securities. It has been benchmarked to the BSE 200. The fund allocation will be 80-100% of net assets in equity, and up to 20% in cash, debt and domestic exchange-traded funds (ETFs). The fund may invest up to 10% in foreign securities, including overseas ETFs. The exit load applicable will be 1% if redeemed within one year, while the minimum amount for lumpsum investments is Rs5,000. The new fund offer (NFO) is open till 15 December.

ICICI Prudential to launch ICICI Prudential Oil Fund

ICICI Prudential MF has filed an offer document with Securities and Exchange Board of India (Sebi) to launch ICICI Prudential Oil Fund. It will be an open-end debt fund that will invest in oil-linked debentures created by investment banks, where these debentures will provide coupons (returns) linked to oil prices. It would be the first oil fund available to domestic investors. The aim of the fund manager would be to invest 80% of the total assets in oil-price-linked foreign debt securities. The fund can hold 20% of the debentures till maturity.

What longer trading hours will mean

Earlier this year, when the Securities and Exchange Board of India (SEBI) mooted extending trading hours on Indian bourses, it essentially hoped to facilitate better price discovery and thereby help investors. Another, but more understated, part of the agenda was to infuse life into the derivatives segments, especially the Nifty Futures trading where the fear was that our markets will get exported.

Generally speaking, the most important hours on the stock markets are the first and the last hours. Almost 55-60 per cent of the volumes are registered during these two hours. The problem was, because of the time difference between India and countries in the Far East, these markets were well into their trading day when the BSE/NSE opened. Volatility in these markets affected the Indian markets and often the difference between the closing and opening prices was steep. An early opening of the market is expected to correct this.

Second, and equally critical, is the issue of the market for Nifty Futures which have also been listed on the Singapore Exchange. It was apparent that given the fact that Singapore Exchange opened earlier than the BSE/NSE and that a lot of the institutional investors in the Indian market were also based there, increasingly, the market for Nifty Futures was moving to Singapore. The extended trading hours will correct this to an extent.

But there are other issues which might still need time to get sorted out. For one, the extended hours would mean additional pressure on the back office processes. Any lag in these could be disastrous for a brokerage house in terms of risk management. While a lot has been said about how institutional brokerages will now have to work longer hours, I think the real challenges will be faced by brokerages that cater more to the retail clients. Fact is institutional brokerages already work longer hours to coincide with the hours put in by their clients in India or Hong Kong or Singapore. It is the retail brokerages with offices running into thousands that will have to make arrangements to coordinate their front and back office processes.

I don’t think volumes will go up significantly for the brokerages and, as a result, neither would the revenues. The larger issue for brokerages has been the numerous holidays, which could also impact volatility and activity, and we are hoping that these will be cut down. For the extended hours to work smoothly it is critical to ensure that the settlement process with banks is aligned. Despite the efforts by the central bank, the Real Time Gross Settlement (RTGS) system so far has been a limited success. Now, with the amount of time for settlement being curtailed, it is even more critical that RBI as well as the banking system push for RTGS more aggressively.

The ideal solution would be to have only index futures traded for extended hours while everything else continues with the current schedule. This will achieve all the benefits of longer hours while still not stretching the brokerage back office.

To summarise, while the modified version of extended trading hours for only index futures markets would be welcome, it might mean adjustments in the short run for brokerage houses. Market players will have to automate their systems to a greater extent to ensure that there are no lags in the settlement process.

Creating value

The move by IVRCL Infrastructures to transfer its BOT projects to IVR Prime is positive for the duo.

In a recent move, IVRCL Infrastructures & Projects (IVRCL) has decided to transfer its BOT projects in the water and road segments to IVR Prime Urban Developers. The deal is seen as favourable for both the companies on various counts and will enhance clarity on the company’s business structure. Going ahead, the prospects of both companies look good. For IVRCL, given its strong order book position and huge investments planned towards infrastructure creation, its revenue visibility is stronger.

The deal
IVRCL is one of the leading players in the infrastructure space having presence in growing segments like water, irrigation and roads. IVRCL is merging its two wholly owned subsidiaries namely, IVR Strategic Resources & Services and IVRCL Water Infrastructures with IVR Prime (a listed real estate player). Both the 100 per cent subsidiaries own and operate nine BOT projects in the water and road segments; of this five projects are completed or nearing completion while four are in early stages of development. The total value of these assets is estimated at about Rs 938 crore, which looks fair at about 2.1 times the book value of equity investments (Rs 450 crore) in these projects.

Gains for IVRCL
The consolidation of all its BOT projects under one entity will provide clarity on the company’s business structure. It will also enable IVRCL to bid for larger projects as this deal will lead to an improvement in its debt-equity ratio and effective utilisation of shareholders’ funds. As a consideration for transfer of these businesses, IVRCL will get 5.95 crore shares in IVR Prime, which will increase its stake in IVR Prime to 80.5 per cent. Thus, it will continue to gain from the growth in the businesses of its subsidiaries.

VALUE OF IVRCL STAKE
	Pre merger	Post merger
Outstandaing shares (in crore)	6.4	12.4
IVRCL Stake in IVR Prime (%)	62.4	80.5
No of shares held by IVRCL (in crore)	4	9.95
CMP of IVR Prime (Rs)	158	158
Value of IVRCL stake (Rs cr)	631.9	1,562.30
Value of IVRCL stake (Rs per share)		117

Better visibility for IVR Prime
IVR Prime covers all segments of real estate development including housing, commercial and retail. The company has a land bank of over 3,300 acres spread across cities like Hyderabad, Bangalore, Chennai, Vishakhapatnam, Pune, Noida and Nagpur. Despite its huge land bank across major cities, IVR Prime is not doing well primarily given the slowdown in the real estate market. During 2008-09, IVR Prime reported an 87 per cent decline in sales while net profits fell by 95 per cent.

VALUATION OF BOT ASSETS
Share issued by IVR Prime (in cr)	5.9
CMP of IVR Prime (in Rs)	158.0
Transaction value (Rs cr)	938.5
Invest. value of transferred BOT proj. (Rs cr)	450.0
P/BV (x)	2.1

The situation was equally grim in the recent quarter ended September 2009, as the company reported revenues of mere Rs 34 lakh and a loss of Rs 6.1 crore. But now, the group wants to gradually depart from the real estate business and will possibly look for disposing off some of its assets (land bank) and use the funds for the infrastructure projects, which provide greater scope to grow given management’s experience and capabilities in this sector. Besides, it will offer relatively smoother revenue streams for the company, compared to the lumpy revenues in the real estate business.

Higher leveraging
While it has a large land bank, IVR Prime does not have any debt in its book and is sitting on a large net worth of Rs 1,093 crore (including minority shareholders). Analysts believe that most of IVR Prime’s assets are not utilised fully and this move could benefit the company. According to analysts’ estimates, post merger the company’s net worth will increase to almost Rs 2,000 crore, which can be further leveraged to raise funds (including debt) enabling IVR Prime to bid for larger BOT projects in the infrastructure space, especially the large PPP projects which are expected to come in the road segment.

Conclusion
Analysts believe that there would be more clarity now in terms of the structure of the business. IVRCL Infra will operate in the construction segment, whereas IVR Prime will own the various infrastructure assets in the BOT space. The deal is thus, considered to be a winning proposition for both the companies where the assets can be utilised to their optimum levels and focus can remain on the infrastructure space particularly the BOT projects, where the government is keen to encourage private participation.

FINANCIALS
in Rs crore	H1FY10	H1FY09	% change	FY10E
Net sales	2,350	2,106	11.6	5,665
EBIDTA	224	191	17	545
Net profit	84	100	-15.3	236
EPS (Rs)	6.3	7.5	-15.5	17.5
PE (x)	-	-		22.1
Consolidated financials of IVRCL Infra Source: CapitaLine; E: analyst estimates

For IVRCL, it already has an order book of Rs 14,900 crore, which is over 3 times its 2008-09 revenues and provides enough visibility and growth. Analysts are positive on IVRCL, and they value the company between Rs 380-460 per share on the SOTP basis including the valuations of its listed subsidiary Hindustan Dorr Oliver, in which IVRCL holds a 52 per cent stake.

Powering ahead

Big ticket power investments should ensure that REC grows its loan book rapidly in the future.

As part of the government’s disinvestment programme, Rural Electrification Corporation (REC) would be one of the first public sector companies to tap the primary market. The follow-on offer, comprising 15 per cent fresh equity and five per cent offer for sale by the government, would fetch around Rs 3,750 crore at the two-week average price of Rs 220. The management expects to file its draft prospectus by mid-December and hopes to hit the market by the end of the fiscal. A major part of the proceeds (about Rs 2,800 crore) would be going to the company coffers, which would help it to finance the growing needs of the power sector. While over 60,000 MW of power generating capacity is expected to be added in the current five-year plan (2008-2012), which has already been generating increased business volumes for financiers like REC (it proposes to disburse a lakh crore in this period), the target of 100,000 MW for the next five-year plan (2012-2017) indicates that volume growth should remain robust. Apart from higher business volumes, REC’s ability to sustain margins will ensure robust profit growth for the next couple of years.

Robust demand
A sum of rupees 10 lakh crore is expected to be invested in the power sector in the eleventh Five-year Plan. Around three-fourth of investments are set to be made by government related utilities. With most of them being the mainstay of REC’s customer profile, expect the company to lend a reasonably large portion in the future also. REC had sanctioned loans worth Rs 1.2 lakh crore in the last three years. Besides, participation of the private players in the power projects is on the way-up, and is also throwing up opportunities for the company. In view of this, REC expects to increase lending to private sector power projects from 6 per cent to 15 per cent in the next three years.

The deceleration in the economic growth in the second half of 2008-09, saw sanctions slowing. As things improved from there-on, REC had started to lend more. In the first half of 2009-10, the company sanctioned loans equivalent to almost 80 per cent of total loans it sanctioned in the entire 2008-09. Little wonder, REC has been able to report strong growth in revenues in the first half, while profits have grown faster thanks to the company’s ability to curb operating expenses.

Going ahead, the management expects to sanction loans worth Rs 50,000 crore in 2009-10. Disbursements are set to increase in line; it grew at 27 per cent in the last three years, and the company expects to sustain 25-27 per cent growth on an average for the next two years.

REC's had primarily been a financier to the transmission and distribution (T&D) segments in the past; it is changing its profile towards generation projects gradually. This is evident in the way the share of generation segment has moved up in the recent years, up from 22 per cent in Q1 FY08 to 38 per cent as of Q2 FY10. The change in asset mix towards the generation segment gives a balance to REC’s asset profile; however, the management feels that this proportion would increase up-to 50 per cent in the next two years.

Margins stable
REC had consistently been able to maintain spreads of around 3 per cent. In the recent quarter also, the spreads were 3.35 per cent as REC benefited from lower funding costs. REC has access to capital gains tax exemption bonds (issued under Section 54EC) that are been sourced at lower rates (interest rate of 6.25 per cent) compared to relatively more expensive sources like banks. However, in spite of the declining share of these bonds in total borrowings (as REC borrowed more from other sources), the company has been able to maintain spreads.

However, going ahead, things may be a bit different. In 2007, the share of low-cost 54EC bonds was 46 per cent and subsequently it reduced to 32 per cent in 2008-09. It further fell to 22 per cent in Q2 FY10, as REC retired some bonds issued earlier. While this figure could further reduce to 10-15 per cent in 2010-11, with loans (given to customers) worth Rs 7,800 crore and Rs 12,000 crore expected to be reset (at higher yields) in 2009-10 and 2010-11, respectively, it should offset the pressure on spreads in the medium-term. Going ahead, REC’s management feels confident of sustaining spreads in the region of 2.75-3 per cent on a regular basis.

STEADY GROWTH
in Rs crore	FY09	H1 FY10	% Chg	FY10E
Net interest income	1,768	1,167	39	2,380
Operating income	2,036	1,317	40	2,533
Net profit	1,272	966	71	1,793
EPS (Rs)	14.8	-	-	20.9
P/E (x)	15.9	-	-	11.3
P/BV (x)	2.8	-	-	2.4
E: analyst estimates; % change is y-o-y

Conclusion
While a majority of REC’s lending is to central and state electricity boards, it is either secured by escrow or mortgage ensuring better recovery and timely settlement of loans. Thus, asset quality, which had remained intact with net non performing assets at 0.04 per cent as on Q2 FY10, should remain healthy.

Initiatives to link risk weight to credit rating as well as separate categorisation of NBFCs engaged in infrastructure lending would provide easier access to funds to companies like REC.

Going ahead, with demand expected to remain robust and margins likely to stay healthy, expect REC’s loan book and net profit to grow at 25 per cent annually in the next two years. At Rs 232, the stock is trading at 2.4 times its 2009-10 book (pre-offer), and can be considered on dips.

Analysts' corner

Bharat Electronics
Reco price: Rs 1,631
Current market price: Rs 1,572.50
Target price: Rs 2,144
Upside: 36.3%
Brokerage: Anand Rathi Research

Bharat Electronics’ (BEL) order backlog at the end of October 2009 stood at Rs 12,260 crore, up 18 per cent from Rs 10,390 crore as on April 1, 2009. The company has seen healthy order inflows of Rs 3,950 crore in the first half of 2009-10 and expects more to follow in the second half. Nevertheless, some of the orders received also relate to “off-set clause” as per the new defence procurement policy. The brokerage feels that the “off-set provision” for defence procurement has opened new avenues for the company’s growth.

Revenues in the first half of 2009-10 have grown 89 per cent year-on-year (y-o-y) and earnings by 146 per cent. Though this growth seems exponential, it is not indicative of growth for the year and is a function of equally spread-out revenue in 2009-10, compared to 2008-09.

The brokerage has raised its target price for BEL to Rs 2,144 (from Rs 1,998 earlier), which is 17 times and 15.5 times the estimated EPS for 2010-11 and 2011-12, respectively. As BEL should continue to deliver strong growth in earnings as well as order inflows in the future, the brokerage maintains a buy on the stock.

Pantaloon Retail
Reco price: Rs 324
Current market price: Rs 335.25
Target price: Rs 400
Upside: 19.3%
Brokerage: India Infoline

Pantaloon Retail (PRIL) has begun the restructuring of its existing businesses along three verticals. This would entail firstly, the consolidation of PRIL as a pure retail play and transfer of the Big Bazaar and Food Bazaar formats into wholly-owned subsidiaries of PRIL, secondly, transfer of all non-retail businesses into a separate company and thirdly, value unlocking in the financial services businesses.

The management hinted at a possible tie-up with an international retailer to ramp up its discount food format, which could have an exposure of as high as 65-70 per cent (of sales) to food products. It said that the induction of such a foreign partner is one of the drivers for the planned Big Bazaar hive-off.

PRIL derives 30 per cent of revenues from its private labels, which has given the company leverage in its relationships with category leaders such as Nestle and Kellogg’s. PRIL is also expected to do a private-label launch in cereals. To extend the reach of its private labels beyond its own store, the company could be exploring the idea of buying out an FMCG company, preferably one focused on foods. The Big Bazaar hive-off would allow efficient use of capital, transform PRIL into a pure retail play and allow investors a direct exposure to pure discount retailing if and when Big Bazaar gets listed. Maintain buy.

Reliance Industries
Reco price: Rs 2,132
Current market price: Rs 2,125.15
Target price: Rs 1,750
Downside: 17.7%
Brokerage: Kotak Securities

Reliance Industries (RIL) did not make any acquisition-related announcement at its AGM contrary to Street expectations. The key announcements include peak gas production from KG D-6 block to be achieved by second half of 2009-10, oil production from KG block at around 8,000 barrel per day with peak production to be achieved by end of the fiscal, renewed focus on a new 2 MTPA petrochemical complex at Jamnagar, announced in an AGM two years back and commencement of exploratory drilling in Block 18 in Oman.

The brokerage has maintained its 2009-10 and 2010-11 EPS estimates of Rs 97 and Rs 138, respectively. The brokerage does not rule out the possibility of downside to the earnings estimates for 2009-10 since current chemical and refining margins are below its second half 2009-10 assumptions. It believes that its 2010-11 earnings estimates also look challenging without a very steep recovery in refining and chemical margins.

The 12-month SOTP-based fair valuation has been retained at Rs 1,750. Key upside risks are steep global economic recovery and higher than expected E&P reserves. However, the downside risks to the SOTP-based valuation include weaker than expected chemical and refining margins and unfavourable developments in the ongoing RIL-RNRL legal dispute. The brokerage maintains that the stock looks expensive.

Tata Steel
Reco price: Rs 547
Current market price: Rs 551.60
Target price: Rs 669
Upside: 21.3%
Brokerage: Edelweiss Securities

The management has guided that Corus’ capacity utilisation is likely to increase from around 56 per cent in June 2009 quarter to around 85 per cent in March 2009 quarter and maintained its 2009-10 and 2010-11 volume guidance at around 15 million tonne (MT) and around 17 MT, respectively. The management maintained that the full benefit of lower-cost coking coal and iron ore would accrue only from December 2009 quarter. Overall savings is likely to be in the range of $125 per tonne of steel.

Tata Steel might increasingly focus to reduce its debt-equity ratio albeit at the cost of dilution. The GDR issue of $500 million and the CARS to FCCB swap would reduce net debt-equity ratio from 2 in June 2009 quarter to 1.6 post the issue. Post September 2009 quarter standalone results, the management guided for reduction in debt of $1.6 billion in the next 12 months.

Recent uptick in Chinese steel prices and strong recovery in Baltic freight index continue to point towards recovery in global steel. Expect firm to moderately increasing steel prices in March 2009 quarter and then into 2010-11. With increasing volume growth, firm to moderately increasing European steel prices and reducing costs at Corus going forward, the brokerage has increased their 2010-11 EV/EBITDA estimates for Corus from 4.5 to 5.5, and maintains buy on the stock.

Jaiprakash Associates
Reco price: Rs 237
Current market price: Rs 232.90
Target price: Rs 266
Upside: 14.2%
Brokerage: Sharekhan

The management of Jaiprakash Associates (JAL) announced that the company is looking at diluting 15 per cent stake in its subsidiary, Jaypee Infratech (JIL), for Rs 2,500 crore. JIL is constructing the 165-kilometre-long six-lane Yamuna Expressway (formerly Taj Expressway) connecting Greater Noida and Agra. The company would be filing the draft red herring prospectus for JIL in a week and will hit the markets with a public offering in January 2010.

Assuming JAL makes a fresh issue of equity to raise Rs 2,500 crore, the indicated equity value of JIL works out to around Rs 16,670 crore. Accordingly, the derived value of JAL's holding of 95.5 crore of JIL's shares works out to Rs 14,005 crore. This is marginally higher than the value of Rs 14,512 crore assigned in the brokerage’s SOTP valuation of JAL.

Though it sees JAL emerging as a leading infrastructure player in the next few years, there is limited upside from the current level based on SOTP valuation of Rs 266. At the current market price, the stock is trading at 24.8 times 2010-11 earnings estimate. Maintain hold.

Multi-decade bull run in the making, says Jhunjhunwala

Rakesh Jhunjhunwala today said the world was facing the greatest slowdown since the Great Depression and India was being recongnised across the world for its resilience.

“India is on the verge of unprecedented multi decade growth. Choice of asset class will decide the return. I have allocated 100 per cent of my portfolio to equity asset class,” he said. He added that seven to eight stocks contributes 80 per cent to his portfolio.

Speaking at a seminar organised by the Indian Institute of Foreign Trade he said that he looks at a time horizon of three-six years for stock market investment. Jhunjhunwala, however, said that he maintains very low churn in his portfolio. “For investing in a company I look at how large is the opportunity for the business because opportunity there is no profit. In a capitalist society you cannot carve an opportunity unless you are efficient,” he added.

He further said that another factor is scalability and the price at which one buys.

“I also do constant examination of business model and capital structure of company. Value investing is relevant in all circumstances in all markets. Quest to be a good investor is a journey and not a destination. One should never get carried away by short-term movement in market. Seeking alpha in today’s environment is no different than seeking alpha in any other environment,” said Jhunjhunwala, partner, Rare Enterprises.