IDFC Infrastructure Mutual Fund NFO

I’ve seen at least one comment that confused the IDFC Infrastructure Mutual Fund to the IDFC Infrastructure bonds, so let me say it upfront that this is a equity mutual fund, and not a bond.

You will not get any tax benefits from investing in IDFC Infrastructure mutual fund, and when you invest in this infrastructure mutual fund your money is going to be invested in the shares of infrastructure companies in India.

This NFO (New Fund Offer) has started on February 14th, and will close on the 28th February.

This mutual fund will invest 80 – 100% of its assets in the shares of companies that are related to infrastructure related activities, and the remaining money will be invested in debt and money market instruments.

The scheme information document describes infrastructure companies as:

  • Power and Utilities – generation, transmission, trading and distribution of power,
  • Oil and Gas – (a) petroleum and natural gas, including exploration and production, import terminals, liquefaction, regasification, storage terminals, transmission networks and distribution networks and (b) development of technology and production of renewable energy of fuels,
  • Ferrous and non-ferrous metals, including mining, production and distribution,
  • Transportation – (a) roads, including toll roads, rural roads, bridges, highways, road transport providers and other road-related services, (b) rail system, rail transport providers and other railway-related services, (c) ports, inland waterways, coastal shipping, including shipping lines, dredging and other port-related services, (d) aviation, including airports, airlines and other airport-related services and (e) distribution/logistics services,
  • Telecom – telecommunication services, including radio paging, domestic satellite service, network of trunking, cable TV services, broadband network and internet services,
  • Industrial and Commercial Infrastructure – (a) urban development including industrial parks, special economic zones, real estate development, water supply, irrigation, water treatment systems, sanitation and sewerage systems and solid waste management systems and (b) tourism including hotels, convention centers and entertainment centers,
  • Rural Infrastructure – infrastructure related to agriculture, food distribution, irrigation and rural development and
  • Others – (a) development, operation and maintenance of educational institutions and healthcare facilities, (b) technology-related infrastructure, (c) manufacturing of equipments, components and materials or any other utilities or facilities required by the infrastructure sector like energy saving devices and metering devices, etc., (d) environment related infrastructure, (e) capital goods/engineering equipment, (f) financial institutions including banks and housing finance companies (g) building materials and (h) any other types of utilities or facilities or services as may be determined by the Board of the Fund from time to time.

The NFO has a minimum investment requirement of Rs. 5,000 and there is an exit load of 1% if you redeem before a year. There is a dividend and growth option, and you can select one of them.

I created a list of infrastructure mutual funds some time ago and there are about 13 such funds right now, so if you were planning to invest in the infrastructure sector you have plenty of options at present.

Personally, I don’t see any benefit in applying in NFOs when there are other alternatives in that segment because there is no past performance data available for the fund, and of course as you already know too well that a 10 rupee NAV is a meaningless thing.

5 thoughts on “IDFC Infrastructure Mutual Fund NFO”

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  2. I generally don’t care for sector-specific funds. A mutual fund management team is supposed to search across sectors to find superior investment candidates, so why would I want to limit them to one sector only? A particular sector may be attractive today, but (say) a year later might be overbought and expensive. Why would I not want my fund manager to have the flexibility to move into other, better value sectors? I’d rather invest in a diversified fund and have my fund manager be overweight on Infra if indeed there are superior value / growth plays to be found there, while having the ability (indeed the obligation) to discover and invest in better opportunities across sectors as they arise.

  3. I think IDFC infrastucture fund is a nice fund. I have invested a small amount in it. I think the long term returns shall be high and would be really beneficial. The areas where the fund shall be diverged seems to be all growing aspects of the infrastructure fund. Though there is some skepticism in the markets about the infrastructure sector because these funds have not performed very well in the last few years. That’s probably because the theme was overplayed; the valuations went high making the stocks expensive leading to poor returns. All this was further aggravated with the challenges that long term projects face – timely availability of cheap capital, execution delays, material availability and policy risks. But now when some of these projects are near completion and are ready to be monetized, valuations in infra sector are getting corrected and appear attractive and government has increased infrastructure spends drastically; it seems like the right time to invest in infrastructure funds and benefit from growth the sector promises.

    1. All the best for your investment Rohan – from your comment it appears to me that you have invested in other infra funds as well. Is that true? Any reason why you didn’t choose to invest in an existing infra MF where you know how the performance was?

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