Infrastructure Schemes, an attractive investment avenue

The infrastructure theme has played a key role in the last fiscal to enrich the returns of many investors. Around 18 Infrastructure schemes, which have completed three years, have posted an average return of 42.5 per cent in the last one year. Even the funds within this theme that are not top performing, in last three years, has helped investors to generate better returns.

Going ahead, these schemes are poised to give some more returns in the next few years. A continuous push from the Government of India is a key factor behind this. The firms involved in the railways and road construction have benefited the most as their order books have improved in the last few years. However, the order executions that are in-process are yet to get reflected in the earnings of the companies.

Recently, the NHAI (National Highways Authority of India) increased its award target from 6,000 to 10,000 km for the upcoming year. Also, the government is aiming for the construction of ~83,680 km of roads with an outlay of Rs. 6.9 trillion in the coming five years with its road building programme. This provides a huge opportunity for infra firms.

These projects are spread over a long span of time (3 to 5 years) hence the cash flows coming from these projects will be spread over the years. However, companies which are highly leveraged due to increased borrowing are taking concrete steps to reduce the debt and lower the interest outgo to increase the profitability. With these steps, infrastructure companies are also aiming to improvise their position to bid for the upcoming projects.

Considering these aspects, we see the funds with the core infrastructure investments are poised for the growth over a long period of time (3 to 5 years). Though the volatility and risk are higher in these schemes, the returns over the longer term will be a good reward for the risk.