ICICI Prudential Mutual Fund on July 2, 2024 launched the ICICI Prudential Energy Opportunities Fund. The open-ended equity scheme will predominantly invest in the energy theme.
According to ICICI Prudential Mutual Fund, the scheme aims to generate long-term capital appreciation by investing in equity aund equity-related instruments of companies engaged in or benefiting from the growth in traditional and new energy industries and/or sectors, as well as allied businesses, including among others, oil and gas, coal, gas as well as new-age green energy.
The new fund offer (NFO) opened on July 2, 2024 and will close on July 16. The minimum application amount is Rs 5,000 and in multiples of Re 1, ICICI Prudential Mutual Fund said in its scheme information document (SID).
Investors can also invest through systematic investment plan (SIP) in daily, weekly, fortnightly or monthly mode. The minimum investment will be Rs 100 and in multiples of Re 1 with a minimum of six instalments. For quarterly SIP, the minimum investment will be Rs 5,000 and in multiples of Re 1 for a minimum of four instalments.
The fund will follow the Nifty Energy TRI as its benchmark. Since this will be a sectoral or a thematic fund, it will invest primarily in the energy sector. These will be as follows.
Power Ancillaries: Energy performance contracting (EPC), power transmission and distribution value, heavy electrical equipment, and energy efficiency plays (manufacturing electrical equipment for production, transmission and distribution of energy).
Oil Value Chain: Upstream (oil exploration and production), integrated refining and marketing (refineries and marketing), standalone refining (refineries and marketing), downstream petrochemicals (chemicals and petrochemicals companies) and base oil processors (companies engaging in activities, such as exploration, production, distribution, transportation and processing of traditional and new energy), lubricants, and oil field services (oil equipment and services).
Green Energy: Companies undergoing energy transition, solar value chain, wind power value chain, hydrogen value chain, battery value chain (companies making components of new energy), bio energy value chain (companies involved bio energy value chain), alternate fuel (companies making components of new energy).
Gas Value Chain: Gas transmission (gas transmission and/or marketing), LNG terminal (LPG/CNG/PNG/LNG supplier), and city gas distribution (LPG/CNG/PNG/LNG supplier).
Power Value Chain: Coal producer (coal), power generation, power transmission, and power trading.
According to ICICI Prudential Mutual Fund, India’s structural growth story is robust, with energy playing a major role in achieving growth targets.
Energy demand is expected to rise over the next decade, due to factors, such as climate change, premiumisation, focus on manufacturing, and increasing per capita income. Numerous companies are also involved in the energy value chain, thus offering investors opportunities for a diversified portfolio.
“This is a decade-long theme that favours long-term investments, thus making it suitable for investors with a long-term horizon to invest in the scheme,” ICICI Mutual Fund said in a statement.
Sankaran Naren, executive director and chief investment officer, ICICI Prudential AMC said: “Energy is the cornerstone of industrial growth and economic development. With the ongoing transition towards renewable energy and the government’s focus on achieving net-zero emissions, the energy theme offers significant growth potential. Through this scheme, investors can gain access to a diversified portfolio of companies across the energy value chain.”
“Although Nifty Energy Index has outperformed the broader market recently, the valuations remain reasonable, and investors may consider this scheme from a long-term perspective,” he added.
There is no denying that energy is an emerging theme, considering India’s macro-economic situation. As India aims to move towards renewable energy, and the government’s focus is also on achieving net-zero emissions, this sector presents significant opportunities. This is evident from the performance of the Nifty Energy Index, which has delivered 23.69 per cent returns, compounded annually, in the last five years.
However, in terms of risk, it carries higher risk than any diversified fund, as the future of the fund will rely completely on one theme. Also, in terms of benchmark index composition, it is highly concentrated. This also adds to the risk factor. If you have already invested sufficiently in a diversified equity fund, and believe that the energy sector has potential to deliver better returns, you might consider investing in this fund with an investment horizon of five years or more.
