CIA 3

FIXED INCOME SECURITIES

MBA F2

Institute of Management
CHRIST (DEEMED TO BE UNIVERSITY), Bengaluru
SEPTEMBER 2020
 REPORT ON L&T TRIPLE ACE BOND

INTRODUCTION:
Larsen & Toubro is a major technology engineering construction manufacturing and financial services
conglomerate with global operations. The company is one of the largest and most respected companies in
India's private sector. L&T Group comprises 118 subsidiaries, 6 associates, 25 joint-venture and 35 joint
operations companies.

Investment Objective:-

The scheme seeks to generate regular return by investing predominantly in AA+ and above rated debt and
money market instruments.

Portfolio:- 

No of Debt holding - 55

Modified Duration - 5.71 years

Yield to maturity - 6.31%

Competitor return for 5 years bond:-

Asset allocation:-

RETURNS %

Duration  Return  SIP Return

-0.08
1 month -

3 months 2.95 5.69

6 months 6.77 13.43

 1 year 12.25 13.83

3 years 9.47 13.20

5 years 8.68 11.20

CREDIT RATING:
The rating of this bond is comparatively higher than the corporate bond. Meaning it has more
safety than the corporate bonds and has lesser risk.
ELIGIBLE INVESTORS:
Investors looking into safer investment options than equity funds with a shorter period of time.

Investors who are ready to take up a considerable amount of risk.

RISK FACTORS:

Standard Deviation value gives an idea about how volatile fund returns have been in the past 3
years. Lower value indicates more predictable performance. With the data shown above, the fund
is less predictable than other bonds.

Beta value gives an idea about how volatile fund performance has been compared to similar
funds in the market. Lower beta implies the fund gives more predictable performance compared
to similar funds in the market. From the above table, one can easily see that the performance of
this bond is less likely to be predictable when compared with other bonds.

Sharpe ratio indicates how much risk was taken to generate the returns. Higher the value means,
fund has been able to give better returns for the amount of risk taken. The Sharpe ratio is
standing good at 0.93. This shows that the fund is able to give back moderate returns.

Alpha indicates how the fund generated additional returns compared to a benchmark. The alpha
value is lower when compared among its peers.

RECOMMENDATIONS:
 Generation of regular and stable income over medium to long term.
 Ideal investment in this bond is 1 year as it has maximum return compared to the return in over 5
years.
 Since the asset allocation shows that the risk of the bond is between low and medium the bond
will generate a stable income and safe return.
 As an investor, this bond generates higher income but it also involves lots of risk. Investing for a
short period of time is recommendable for this type of bond.