psu fund

PSU Fund

India’s Precious Stones Unearthed: Bharat Ratna’s

Get the PSU Advantage

Source: Bloomberg & Capitaline

PSU: Powerful Presence

BSE 100 -Total marketcap - 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%)`


PSU: Surging Incomes

• Dividend payout has been in the range of ~26.5%.

• Net profits have grown at a CAGR of 17% in last 10 years.

• 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

DIVIDENDPAYOUT

PSU: Undisputed Leaders Virtual Monopolies

PSU: Industry leaders in their respective sectors

PSU: In many businesses, PSUs are virtual monopolies

Nifty – 4 x i.e. Rs. 4,07,154

Sensex – 4.5 x i.e. Rs. 4,33,801

BSE PSU Index – 10 x i.e. Rs. 10,04,463

Rs. 1,00,000 investment

as on 1st Jan 2001Source: Bloomberg

PSU: Proven Wealth Creators

As on 23rd Dec 2009

Your Investment of Rs 1 Lac on 1st Jan 2001, would have become Rs. 10 Lacat BSE PSU Index as on 23rd Dec 2009.


PSU: Sharing Prosperity – Raining Dividends

Source: Bloomberg

PSU: Unbelievable Track Record – Robust Performancevis a vis Sensex & Nifty

BSE PSU Index which consists of 48 public sector

companies has outperformed leading companies

which are represented in the Sensex & Nifty

Contrary to General Perception…

PSU companies have been the biggest wealth creators over the years

Source: Bloomberg, Annual Report & Capitaline

PSU: Perceived Inefficiency – Proven Ability to Competewith the Private Sector

PSU Vs Pvt Comparison (Based on FY 2008 – 09)

SBI ICICI

NIM 2.60% 2.30%

ROE 17.10% 7.80%

Credit Growth 30.20% -3.20%

CASA 41.60% 28.70%

Valuation (P/BV) 2.2 2.1


REC HDFC

NIM 3.09% 3.60%

Credit Growth 30.70% 16.20%

ROE 22.50% 18.20%

Valuation (P/BV) 3.3 5.7


ONGC RIL

Sales Growth 8.00% 5.00%

Ebitda Margin 40.00% 17.30%

ROE 21.20% 18.20%

P/E* 12.3X 19.3X


BHEL L & T

Sales Growth 35% 35%

Ebitda Margin 16.10% 11.40%

Order Book/Sales 4.19 2.09%

P/E* 25x 28x

PSU: Strong Fundamentals


PSU: Unleashing of Potential Re-rating Valuation Gap

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

PE Multiple Across Segment

15.9

23.2

20.5

Source: Bloomberg

PSU: Peace of Mind Downturns…

BSE PSU vs Sensex

Business Line

16

0

14

0

12

0

10

0

80

60

40

20

0

Sep

– 0

8

Oct

– 0

8

Nov –

08

Dec

– 0

8

Jan –

09

Feb

– 0

9

Mar

– 0

9

Ap

r –

09

May –

09

Jun –

09

Jul –

09

Aug

– 0

9

Sep

– 0

9

Oct

– 0

9

Nov –

09

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

PSU: Safe & Secure

Source: Bloomberg

As on 30th Nov 2009

Index Performance

BSE PSU

Index (%)

Sensex (%) Outperformance (%)

Last One Year 99.3% 86.2% 13.1%

Last Two Years -2.5% -6.5% 4.0%

Since Inception (4th June 2001) 29.1% 20.4% 8.7%

Source: Bloomberg

Proven Resilience in Economic Downturns

PSU: Unparalleled Resilience

On the cusp of the third major Disinvestment initiative…

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

PSU: Privatization – Icing on the Cake

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.”

Source: Bloomberg

PSU: Stock Relating Post Privatisation

Improved accountability Faster adaptability & proactiveness Openness to private sector management practices Better compensation structure Improvement in Productivity and efficiency

Candidates for divestment as the average government shareholding is more than 75%


PSU: Unrealized Opportunity

Company Name Government Stake (%) Probable Disinvested Stake (%) Probable Disinvestment in Rs. Cr

NTPC Ltd. 89.5 14.5 24952

NMDC Ltd. 98.4 23.4 38427

MMTC Ltd. 99.3 24.3 43192

Indian Oil Corpn. Ltd. 78.9 03.9 3036

Steel Authority of India Ltd. 85.8 10.8 9720

Power Grid Corpn. Of India Ltd. 86.4 11.4 5020

Power Finance Corpn. Ltd. 89.8 14.8 4293

Neyvell Lignite Corpn. Ltd. 93.6 18.6 4615

National Alluminium Co. Ltd 87.2 12.2 3003

Hindustan Copper Ltd. 99.6 24.6 5915

Rural Electrification Corpn. Ltd 81.8 06.8 1458

Bhagat Electronics Ltd. 75.9 0.9 129

Engineers India Ltd. 90.4 15.4 1209

Indian Bank 80.0 5.0 358

Shipping Corpn. Of India Ltd 80.1 5.1 312

HMT Ltd. 98.9 23.9 1186

Central Bank of India Ltd. 80.2 5.2 308

National Fertilizer Ltd. 97.6 22.6 701

Bank of Maharashtra 76.8 1.8 38

Andrew Yule & Co. Ltd 94.4 19.4 330

Dredging Corpn. Of India Ltd 78.6 03.6 49

Fertlizers & Chemical Traverncore 98.1 23.1 316

ITI Ltd 93.0 18.0 219

Scooters India Ltd. 95.4 20.4 23

Total 148809


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

Name of the Companies

Nifty WeightBefore Free Float(25th June 2009)

Current Nifty Weight(23rd Dec 2009)

Nifty Weight(Assuming 10% Disinvestment)

BHEL 03.95% 2.49% 03.07%

BPCL 00.57% 0.53% 00.63%

GAIL 01.34% 1.25% 01.50%

NTPC 06.06% 1.33% 02.44%

ONGC 08.26% 2.65% 04.08%

PNB 0.75% 0.80% 00.94%

Power Grid Corp 01.71% 0.42% 00.68%

SAIL 02.31% 0.93% 01.48%

SBI 04.09% 3.80% 04.46%

Total 29.04% 14.00% 19.29%

Why PSU Fund?

Why PSU Fund: Positioning & Size Unchallenged

Why PSU Fund: Proven, Scalable and Undervalued

Aviva PSU Fund

Aviva: PSU Fund

Participate in this Stupendous & Unique Opportunity

Benchmark: BSE PSU Index

Proposed Asset Allocation:

Investment in Equities of PSU Companies : Upto 100%

Debt Securities & Money market instruments : 0% - 100%*

* Only in Exceptional circumstances

Aviva: PSU Fund

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.

Aviva: PSU Fund – A Great Investment Opportunity

Aviva: PSU Fund – Investment Approach

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

Aviva: PSU Fund

Aviva: Infrastructure Fund

Investing in

India’s Growth Story

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

India’s Infrastructure: A Big Constraint to Growth

The Biggest Bottleneck for India’s fast paced growth: Crumbling Infrastructure: In urgent need of development…

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

History Says Infrastructure: The Key Growth Enabler

Thus creating a virtuous cycle of investment and growth

India’s Infrastructure: Opportunity in Adversity

Particulars India (2008) Year When China Achieved

China (2007)

Expressways (Km) 200 1989 53,000

Air Passenger Traffic (Mn)

120 2006 186

Cargo Traffic (Major Ports) (Mn Tons)

519 1991 3,882

Power Generation Capacity (GW)

143 1992 720

Finished Steel (Mn Tons)

58 1991 465

Cement (Mn Tons) 218 1989 1,500

141

8364

46 4327 19 9 5 4

0

40

80

120

160Po

wer

Road

s

Railw

ays

Tele

com

Irri

gatio

n

Wat

er S

uppl

y &

San

itatio

n

Port

s

Air

port

s

Gas

Stor

age

US

$ Bn

Eleventh Plan Spending

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.

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

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

India’s Opportunity: Ten Year Vision

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

20.8%

25.9%

21.7% 22.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Nifty Index CNX Infra Index BSE 100 Sensex

CAGR RETURN (%) Over Last 5 Years(As on 30 Nov 2009)

Performance: Score Card



Proposed Asset Allocation:

Investment in Equities of Infrastructure Companies : Upto 100%

Debt Securities & Money market instruments : 0% - 100%*


Fund Objective:

To Invest in equity and equity related securities of companies engaged directly or indirectly in the

infrastructure growth of the Indian economy.


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

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

Aviva: Infrastructure Fund – Benefiting from Your Need

psu fund

Documents

bloomberg psu

psu fundpage

psu advantagepage

vis sensex niftybse

economic downturns psu

bloomberg capitalinepsu

long termbse psu index

leading companies