Equity mutual funds are often termed as value funds in case they invest in companies that are currently trading at a discount with respect to the intrinsic value of their stock. This commonly happens in the case of cyclical industries when they are at the low end of their cycle. But can also occur in the case of companies that are on the verge of a turnaround or revival. As a value fund almost exclusively invests in such resurgent stocks, it is not uncommon for them to have significant exposure to mid and small cap securities.
L&T India Value Fund is a top-performing open-ended equity mutual fund scheme offered by L&T Investment Management Limited, the financial arm of the Larsen & Toubro Group, which includes multiple companies, including a leading engineering and construction company in India. This equity fund offering from L&T Investment Management Ltd. is classified as a multi-cap equity fund as it invests in a variety of equities and equity-linked instruments irrespective of market capitalization.
Investment Objective and Strategy of L&T India Value Fund
The stated objective of this open-ended equity fund is to generate capital appreciation over a long term investment horizon through selective equity and equity-linked investments. The selection criteria would focus on Indian companies that have equities trading at discount, but with the potential for high returns at a later date. If the market conditions are deemed favorable, this fund does have the option of investing in overseas securities traded on international exchanges.
At present, the L&T India Value Fund has an estimated 35% to 40% exposure to large-cap investments and approximately 25% to 40% of the fund is invested in mid-cap company equities while the remainder is small cap investments. The fund has historically identified value stocks in companies and sectors that were on the cusp of revival plays, turnaround or low cyclical earnings. While such events depressed their price with respect to their intrinsic value, they have historically provided much higher returns at a later date.
Fund Information and Statistics
Launch Date: This equity fund was first available for investment in January 2010.
Fund Type: The L&T India Value Fund is best described as an open-ended diversified equity fund.
Minimum Investment: For new investors of the scheme, the minimum lump sum investment required is Rs. 5000, while for SIP investment, the minimum single installment is Rs. 500
Risk Category: Being an equity investment, the fund is prone to volatility as per market movements. However being a diversified equity fund, the volatility risk is decreased by a certain extent hence it is classified as a moderately high-risk investment.
Entry/ Exit Load: As per SEBI directive, all entry loads have been abolished hence it is zero for this fund. An exit load of 1% is applicable in case the investor redeems his/her units before 365 days have been completed since their allocation.
Fund Manager: The L&T India Value Fund is co-managed by Mr. Venugopal Manghat and Mr. Karan Desai. Mr. Venugopal Manghat has over 20 years of experience in capital markets and also serves as the Co-Head of Equities at L&T Investment Management Limited. Prior to joining L&T Mutual Fund AMC, he worked with Tata Asset Management and has previously served as a Member of the Mumbai Stock Exchange. He is a BSE Training Institute Certified professional with an MBA degree in Finance as well as a B Sc. in Mathematics. Mr. Karan Desai, the co-fund manager of the L&T India Value Fund, has an M Sc. Investments degree from the University of Birmingham and a B Com. from Mumbai University.
Plans and Options Available
Dividend Option: This investment option is preferred by individuals seeking periodic income from their equity fund investments. Mutual fund dividends just like share dividends may be declared periodically in case there is the distributable surplus available, however, such payouts are not guaranteed. The dividend per unit leads to an equivalent decline in the NAV of the units, hence this method is deemed to be less suitable for investors seeking capital appreciation of their investment.
Growth Option: This mutual fund investment option is suitable for investors seeking capital appreciation of their investments. In this case, no dividends are provided to investors while they hold units of the fund, However, the NAV and AUM of the fund increases when profits are made, as those are reinvested into the fund. This allows the investor to receive capital gains when they redeem or switch their units at a later date.
Taxation Rules Governing L&T India Value Fund
The L&T India Value Fund is classified as an equity fund, hence short term and long term capital gain taxation rules with respect to equity mutual funds will apply. Short term capital gains tax rules are applicable in case units of the equity mutual fund are held for a period of less than 1 year from the date when units of the fund were allocated. The applicable rate of tax on short term capital gains accrued through such a redemption/switch is 15% as per existing rules. In case units of L&T India, Value Fund has been held for a period of more than 1 year from the date of allotment prior to being redeemed/switched, long term capital gains tax rules will apply to the transaction. As per existing rules, long term capital gains in case equity mutual funds are completely tax exempt. Dividends earned in case of equity funds are also tax exempt in the hands of the investor this is because the dividend distribution tax is payable by the fund house to the government directly.
Leading Investments of the L&T India Value Fund
The following are the notable equity investments of the L&T India Value Fund*:
|Banking and Financial Services||ICICI Bank, State Bank of India, Federal Bank, Indian Bank, Bajaj Finserv, Housing Development and Finance Corporation, Axis Bank, Vijaya Bank, Manappuram Finance, Muthoot Finance, IIFL Holdings, etc.|
|Oil and Gas||Reliance Industries Limited, Mangalore Refinery and Petrochemicals Limited, Indian Oil Corporation, Indraprastha Gas Limited, Gas Authority of India Limited, Hindustan Petroleum Corporation Limited, etc.|
|Cement and Construction||India Cements, NCC, JK Lakshmi Cement, Ramco Cements, Birla Corporation, ITD Cementation, Orient Cement, Visaka Industries, Indian Hume Pipe Company, etc.|
|Chemicals||UPL, Tata Chemicals, Zuari Agro Chemicals, Aarti Industries, Navin Flourine International, Deepak Nitrite, Camlin Fine Sciences, etc.|
|Metals and Mining||Tata Steel, Vedanta, Jindal Steel, NALCO, etc.|
|Automotive||MRF, Jay Bharat Maruti, Balkrishna Industries, Tata Motors, Lumax Industries, Goodyear, etc.|
|Pharmaceuticals||Neuland Labs, Jubilant Life, Divis Labs, Sun Pharma, Unichem Labs, etc.|
|Retail & Real Estate||Future Enterprises, Sunteck Realty, Future Life, HUDCO, Avenue Supermart, etc.|
|Services and Utilities||SpiceJet, VRL Logistics, Shreyas Shipping, Power Grid Corporation, etc.|
|IT and Telecom||Sterlite Technologies, Astra Microwave, Infosys, HCL Technologies, etc.|
|Engineering and Capital Goods||KEC International, Larsen, Engineers India, Transformers and Rectifiers India, etc.|
|Miscellaneous||ITC, Grasim, Triveni Engineering and Industries, Aditya Birla Nuvo, Balrampur Chini, BSE Limited, KPR Mill, CARE, Himatsingka Seide, Nilkamal, Mahindra CIE, Godrej Industries, Max Financial, Sun TV Network, EID Parry, Apar Industries, Jubilant Life, Tamil Newsprint, West Coast Paper, Dwarikesh Sugar, etc.|
*The above portfolio snapshot is for illustrative uses only and subject to change.