New Delhi: Global and domestic investors now have a new index to track the performance of India’s infrastructure firms.
Infrastructure finance company Infrastructure Development Finance Co. Ltd (IDFC) and global index provider FTSE Group unveiled an infrastructure index that would track the performance and key indicators of 63 firms.
These firms are listed on either the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE), and generate at least half their revenues from infrastructure.
The index features companies in transportation infrastructure such as roads, ports railways and aviation; power—generation, transmission and equipment makers; communications infrastructure as well as those involved in water supply, treatment, sanitation and solid waste management.
With private equity and other capital for infrastructure companies on the rise, IDFC and FTSE hope their index will spur the growth of new financial products aimed at the infrastructure sector. India is expected to spend some $320 billion (Rs12.86 trillion) on infrastructure projects over the next few years. “This is a positive development although the real effect will be felt after a couple of years, when there are more infrastructure companies listed in the market,” said Amrit Pandurangi, who heads the infrastructure practice for consulting company PricewaterhouseCoopers (PwC).
IDFC managing director Rajiv Lall said the 63 companies that comprise the infrastructure index have grown at an average compounded annual growth (CAG) rate of 58% since June 2002, compared with roughly 25% growth posted by the BSE and NSE.
The companies in the index were selected based on number of shares available for trading and liquidity. The list will be reviewed twice every year.
The FTSE-IDFC India Infrastructure Index series, which includes a larger index of all infrastructure companies as well as a 30-stock index of the largest companies based on market capitalization, will help in trading and benchmarking of financial products, such as mutual funds and exchange traded funds. There are at least four different infrastructure funds in the country.
The index will allow a comparison between the performance of the Indian index with FTSE’s global infrastructure index as well as with the two major national stock exchanges. The FTSE Group is owned by The Financial Times and the London Stock Exchange.