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ICICI Prudential Manufacture In India Fund: A Make In India Prodigy, Should You Invest? - Outside View by PersonalFN

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ICICI Prudential Manufacture In India Fund: A Make In India Prodigy, Should You Invest?
Oct 8, 2018

On 25th September 2014, Prime Minister Narendra Modi launched a popular program called Make in India to encourage companies to manufacture their products in India and to allure foreign investors to invest in the Indian economy.

Make in India is a bold initiative to boost the Indian economy by promoting India as a Global Manufacturing Hub. And over these years, the program has managed to achieve the much-deserved global recognition of India.

So how would mutual funds not aim to capture the advantages of the Make in India initiative?

ICICI Prudential Manufacture in India Fund is the latest offering from ICICI Prudential Mutual Fund that aims to benefit from the Make in India initiative. It is an open-ended thematic/sectoral equity fund, with an objective to generate long-term capital appreciation. The scheme aims to invest predominantly in equity and equity-related securities of companies engaged in a manufacturing theme especially those that are a part of Make in India program.

[Read: Can 'Make in India' funds make appealing returns for you?]

What is a Thematic/Sector Fund?

A thematic/ sector fund aims to invest in companies that are unified with one specific theme or of that sector. For example, a fund investing in housing theme would invest in sectors such as construction, banks, cement, steel, paints, sanitary ware, etc. that are related sectors that get a boost from demand in housing.

Such funds are usually launched at a time when fund houses sense a growth potential of a certain sector or a cluster of sectors in the medium to long-term future.

As per the current AMFI mandate, the investment in equity and equity related instruments of a particular sector/ theme should be minimum 80% of total assets.

ICICI Prudential Manufacture In India Fund is one such thematic/ sector fund that aims to invest in equity and equity related instruments of companies engaged in sectors mentioned in http://www.makeinindia.com/sectors

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NFO Details of ICICI Prudential Manufacture In India Fund:

Type An open-ended equity scheme Category Thematic/Sector (following manufacturing theme)
Investment Objective The investment objective of the scheme is to generate long-term capital appreciation by creating a portfolio that is invested predominantly in equity and equity-related securities of companies engaged in manufacturing theme.

However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns.
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10 per unit
Plans
  • Regular
  • Direct
Options
  • Growth
  • Dividend
Entry Load NA Exit Load Upto 18 Months from the date of allotment of units it is 1% and Nil thereafter
Fund Manager Mr Anish Tawakley and Mr Mittul Kalawadia Benchmark Index S&P BSE 500
Issue Opens 21st September 2018 Issue Closes 5th October 2018
(Source: Scheme Information Document)

Scheme's Asset Allocation

Under normal circumstances, the scheme's asset allocation or asset distribution weight will be as under.

Instruments Normal Allocation
(% of net assets)
Risk Profile
High/Medium/Low
Minimum Maximum
Equity & Equity related securities of companies engaged in sectors mentioned in http://www.makeinindia.com/sectors 80% 100% High
Other Equity & Equity related securities 0% 20% Medium to High
Debt, Money market instruments, Cash & Cash equivalents 80% 20% Low to Medium
(Source: Scheme Information Document)

Investment Strategy:

As mentioned above the main aim of the scheme is to provide long-term capital growth by investing in a well-diversified portfolio of equity and equity-related securities. The Scheme's key investments would be in manufacturing companies that are likely to benefit from the Government's Make in India initiative. It may also invest in sectors which could probably be added under this flagship initiative later. To view, the companies that are a part of the Make in India program refer http://www.makeinindia.com/sectors.

The fund managers would focus on in-depth research of sectors, business and economic fundamentals while picking up stocks. Given that the ICICI Prudential Manufacture in India is a thematic fund it appears that a top-down approach to stock picking would be followed predominantly. A bottom-up approach is also proposed to seek companies that can sustain for long term in a competitive landscape.

The key parameters while selecting stocks are:

  1. Business Fundamentals
  2. Quality of Management
  3. Industry Trends
  4. Growth Prospects
  5. Track Record and Consistency of Dividend Payments
  6. Volatility of the stock

Given that there are about 25 sectors listed down under the governments Make In India initiative, the fund would hold a well-diversified portfolio of stocks that would potentially benefit from this program. However, the portfolio is expected to be diversified across market caps, thereby following a multi-cap strategy.

Fund Manager/s:

The ICICI Prudential Manufacture In India Fund will be managed by Mr Anish Tawakley, Mr Mittul Kalawadia and Ms Priyanka Khandelwal.

Mr Anish Tawakley is the head of research and fund manager at ICICI Prudential AMC. He completed his B Tech (Mechanical Engineering) from IIT Delhi followed by PGDM (MBA) from IIM Bangalore. Mr Tawakley has over 15 years of experience in equity research. Prior to joining ICICI Prudential Asset Management Company Limited in 2016, He worked with Barclays India for Equity Research for 3.5 years, and before that he worked with Credit Suisse India - Equity research - Indian financial services sector for a short time. He also worked for almost 8 years in Alliance Bernstein (UK) based in London for Equity Research - Financial Services stocks in Emerging Markets. Currently, he is one of the key fund managers along with Mr Mittul Kalawadia.

Mr Mittul Kalawadia has a master's degree in commerce and is also a Chartered Accountant. He is associated with ICICI Prudential AMC since January 2006 and has gained experience of fund management/ investment analyst role by handling Business Planning & MIS, Equity Research and fund management.

Several other schemes managed by Mr Mittul include, ICICI Prudential Focused Equity Fund, ICICI Prudential Dividend Yield Equity Fund, ICICI Prudential Midcap Fund, ICICI Prudential Growth Fund - Series 2, ICICI Prudential Value Fund - Series 1, ICICI Prudential Value Fund - Series 10, ICICI Prudential India Recovery Fund - Series 1, ICICI Prudential India Recovery Fund - Series 2, ICICI Prudential India Recovery Fund - Series 3, ICICI Prudential Business Cycle Fund - Series 1, ICICI Prudential Business Cycle Fund - Series 3, ICICI Prudential Value Fund - Series 20.

Ms Priyanka is a Chartered Accountant and Company Secretary. She manages investments under ADRs/GDRs and other foreign securities at the fund house.

Fund's outlook:

As mentioned earlier ICICI Prudential Manufacture in India Fund would try to ride the wave of manufacturing sector companies under the Make in India Program. Since the launch of this national programme announced by the Modi-led-NDA Government, the manufacturing sector witnessed some growth in its share contribution to GDP. It has recently moved up to 18% from a narrow range of 14-16% earlier. The Government aims to increase this share to 25% of GDP by 2025, as mentioned by the fund house in its presentation. With the implementation of a radical change in the FDI policy regime to attract more FDI inflow, the launch of MUDRA Yojna to fund small entrepreneurs and several other reforms did manage palpable results to boost this effort.

Historically the thematic funds, have managed to work well only for a medium-term of about three to five years growth. Along with no plan in action, earlier this year, the government launched round two of its flagship Make in India program, called 'Make in India 2.0' with focus on 10 'champion' sectors including capital goods, auto, defence, pharma and renewable energy to push growth in manufacturing and generate job opportunities. The government identified these sectors as the ones having great potential to become global champions and drive double-digit growth in manufacturing.

While ICICI Prudential Manufacture in India Fund seems all set to tap the potential of this program, the performance of the fund will depend on the success of this program, which only time will tell.

As thematic / sectors funds focus on fixed set of theme/sectors, the underlying risk potential of such funds is high. What if the underlying theme is out of favour for a long time, or does not meet the expectations of the fund managers and the investors. Investors need to decide for themselves if their risk appetite allows them to invest in this fund. Or will they give sometime to monitor the performance potential of the fund, before committing any money to this fund.

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Author: PersonalFN Content & Research Team

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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