The choppy markets have given rise to a wave of pessimism, bringing to the spotlight one fact: that equity is growth-driven while other asset classes are driven by yield.

And though the India growth story seems to be losing steam, what you cannot miss out is that there are layers of themes that can reinforce this growth story.

One such layer which is crucial is infrastructure . It becomes important and sensible to be a part of this layer. It is this theme that could weather the impact of the negatives that have stalled the markets? upward journey.

With huge investments, better execution capabilities, robust order book, ability to bear the hike in interest rates and prominent and realistic expansion plans, companies in the infrastructure sector (which comprises power, telecom, construction and ports/shipping) form the basis for lucrative and long-term investment. Here are some of the investment opportunities available within the infrastructure space.

Power

With a view to accelerating infrastructure development, the government has contemplated huge capital spending on infrastructure development. It has planned a capital outlay of Rs 23,84,910 crore over the 11th five-year plan. It is estimated that out of the total outlay on infrastructure during the plan period, the government plans to spend 30.4% on power. Hence, the importance of finding investment opportunities makes sense for this sector. Two major companies, which would in the long-term (two to three years), form lucrative investment options are Tata Power Company and National Thermal Power Corporation (NTPC), reckon analysts.

The Tata Power Company(TPC)

Says Shankar K, analyst at Edelweiss Securities, ?TPC is a blend of growth and potential for value unlocking. It is one of the few large listed companies which has not faced any project delays. The company has strong visibility in various projects and continues to demonstrate high-quality execution skills.?Tata Power has an installed generation capacity of over 2,300 MW. It has presence in all segments of power sector: generation (thermal, hydro, solar and wind), transmission and distribution.

The two key power projects ? Mundra (4,000 MW) and Maithon (1,050 MW) remain firmly on track with both projects having achieved financial closure and placed equipment orders.

The company plans a capacity addition of 600 MW this year. It hopes to increase its capacity to 12.8 GW (five times) over the next few years. Of this, 10.4 GW is to be added, while nearly 5.8GW is in an advanced stage of implementation.

Its acquisition of 30% stake in PT Kaltim Prima Coal and PT Arutmin Indonesia mines of Bumi Resources in 2007 adds significant value. It has also incorporated a special purpose vehicle for its shipping business.

The Mundra UMPP requires eight-nine vessels. And the company plans to buy approximately four ships and enter into long-term charter for the rest.

TPC?s integrated approach, particularly with respect to fuel linkages, will be the key differentiator in a regulatory environment favouring efficient private-sector players.

NTPC

NTPC has an installed capacity of 29,394 MW. It has 15 coal-based power stations, totalling 23,395 MW, seven gas-based ones with 3,955 MW and four are JVs worth 1,794 MW. It plans to be a 75,000 MW company by 2017.

NTPC has diversified from thermal power generation to hydro power, coal mining, power equipment manufacturing, oil & gas exploration, power trading and distribution. It is in the entire power value chain. NTPC?s share as of March 31, 2008, in the total installed capacity of the country was 19.1% and contributed 28.50% of the total power generation of the country during 2007-08.

Says Shankar K of Edelweiss Securities, ?NTPC offers scope for appreciation for long-term investors. Its capacity is set to double in the next five years with sufficient internal accruals to fund the entire capex.? The company is also operating between a RoE of 20-23%. Analysts believe that NTPC also benefits from coal mining and operating efficiencies, and higher PLF from new coal plants.

Construction

IVRCL infrastructures & Projects and Nagarjuna Constructions are being seen as strong investment opportunities in the construction sector.

IVRCL Infrastructures & Projects

Says Shailesh Kanani, construction sector analyst with Angel Broking, ?Good execution record, huge order book, which determines revenue visibility in the next 3-4 years, good play on a niche segment ? irrigation form reasons for investment in IVRCL.? Analysts expect a growth of 30-40% in the topline and bottomline of the company. IVRCL has orders worth Rs 1,025 crore in Q4 FY2008. The break-up of the order intake is Rs 79 crore contract to build an animal husbandry research centre in Andhra Pradesh, Rs 478.5 crore orders from Narmada Valley Development Authority for irrigation works and Rs 468.6 crore from irrigation and CAD department of Andhra Pradesh government for modernisation of the Godavari Delta Canal system. There has been a change in the order book composition of IVRCL towards segments like water and irrigation, buildings and transportation. Analysts believe such change will help the company improve margins.

Nagarjuna Constructions Company

As on May 2008, the order book of NCC stood strong at Rs 11,300 crore (excluding Rs 500 crore of L1 stage). NCC bagged six new orders worth Rs 502 crore in Q4FY2008.

NCC Infra has signed a project development agreement with Infrastructure Development Department (IDD), the government of Karnataka, to develop and operate airports proposed at Gulbarga and Shimoga on a build-operate-transfer basis. These would be under public-private partnership. It will include construction and development of runway, terminal, ancillary buildings and other infrastructure.

Of the 10 projects of the company under execution, five are roads, of which one is operational and the rest under execution ? two airports, two hydro power projects and one port.

The order book of NCC is a healthy Rs11,300 crore. About 90% of the order comes from the central and state governments. Says Kanani of Angel Broking, ?Diversified order book, presence in international markets and a huge order book work in favour of NCC.? He says that the company is quoting a P/E of around 10(x) considering its FY09 earnings and would see a growth of 25-30% in its topline and bottomline.

Ports/Shipping

In ports and shipping, Mundra Port and SEZ and Great Eastern Shipping (GE Shipping) form strong investment contenders, say fund managers.

GE Shipping

GE Shipping operates in tanker, dry bulk and offshore segments with a fleet of 47 vessels. It has developed robust business model with diverse revenue streams and mix of voyage (spot) and time charter contracts, which improves earnings visibility in a cyclical industry. Says Vikram Surya, shipping analyst with Karvy, ?We expect strong fleet addition with committed capital expenditure of $ 1.25 billion in shipping and offshore segment to increase consolidated revenue and profits at CAGR of 26.1% and 15.1% respectively over the next three years.?

The company?s shipping business derives 30% revenue from crude segment, 30% from products and 38% from the dry bulk segment. It operates ships on mix of time and voyage charter basis to improve earnings visibility. To cover its operating cost by 1 to 1.5 times, it employs vessels on time charter (long-term contact) to give earnings protection, which is likely to help a company remain profitable even in the event of an adverse market condition.

It is expanding offshore fleet under wholly-owned subsidiary Greatship (India) from 4 vessels in FY08 to 22 vessels by FY10 with capital expenditure of $ 667 million. It has placed orders for 12 new vessels which include four product and eight dry bulk carriers with delivery starting from FY09 to FY12 with committed capital expenditure of Rs 2,300 crore in shipping segment.

Mundra Port & Special Economic Zone (MPSEZ)

MPSEZ is the largest non-major port in India. Benefitting from an excellent location, MPSEZ is set to exploit the growing demand for cargo traffic that is hampered by capacity bottlenecks at other major ports.

Bulk of India?s container traffic (approximately 60%) moves between western and northern ports and MPSEZ is ideally located in this context. MPSEZ is suitably located as regards the most important shipping routes (western countries, which account for most of India?s trade). Its rail linkage with key northern inland container depots (ICDs) is also superior over those of competing ports such as JNPT or Mumbai. For instance, Mundra-Bhildi-Palanpur-Jaipur-Delhi line is shorter by 319 km as compared to the congested Mumbai-Vadodra-Mathura-Delhi route.

MPSEZ has already entered into long-term contracts for bulk of the projected traffic from coal and POL/crude. More than 50% of its estimated coal traffic has been tied up with two 4,000 MW imported coal-based power plants coming up in Mundra (Tata Power and Adani Power). MPSEZ has recently entered into an MoU with Suzuki India for setting up a dedicated car export terminal at the port with initial capacity of 250,000 cars per annum by early CY09. Gradually, the capacity is expected to increase to 400,000 cars.

MPSEZ is also developing a port in around a 32000-acre SEZ of which approximately 50% is already under possession.

The port acts as a strong anchor for industrial development at the SEZ. On the SEZ front, the company booked revenue of Rs 51.86 crore on the upfront lease of 155 acres of land.

Telecom

In the telecom space, Idea Cellular and Reliance Communications are the major investment options that can be considered.

Idea Cellular

Idea plans to foray into four new circles: Tamil Nadu (including Chennai), Mumbai, Bihar, and Orissa. It hopes to commence operations in Mumbai and Bihar by Q2?09, and in Tamil Nadu by Q3?09. A private equity firm, Providence Equity Partners would pump $ 640 million into Idea?s unit, Aditya Birla Telecom (ABTL). The funds will be used for network rollout and ongoing operations of Aditya Birla Telecom, which has a licence in eastern Bihar. The deal is expected to close by August 2008.

Also, the acquisition of Spice Telecom would provide access to the fast-growing markets of Punjab and Karnataka, which account for 11% of India?s total wireless subscribers.

It is estimated that the deal would help the company become totally debt free, with the cash accrual of about Rs 4,500 crore after the preferential allotment to TMI, which holds about 18 to 20% in the company.

Reliance Communications (RComm)

Reliance Communications, the country?s second biggest mobile operator in terms of subscribers, has two key catalysts panning out over the next 6-9 months ? the launch of RComm?s pan-India GSM services and the company securing external tenancy on its tower network ? thus crystallising the value of both RComm?s core business and its tower subsidiary. Also, the stock has been beaten down to a huge extent to make it a good buy. However, with the deal with MTN proving to be abortive, RComm?s dream of entering the South-African market hasn?t panned out.

Though the infrastructure space offers lucrative investment opportunities, you must take into account the fact that the plans of companies, in various sectors such as power, construction, telecom, and ports/shipping, would be executed over a period of two to three years.

And hence, there may be factors like political uncertainty, prohibitive interest rates, which may slow down the earnings growth of these companies. However, as these companies have better execution capabilities, prominent and realistic expansion plans, they may weather the effect of these temporary negatives.