Annual Financial Report

RNS Number : 6100D

India Capital Growth Fund Limited

25 March 2011

 



25 March 2011

INDIA CAPITAL GROWTH FUND LIMITED

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

CHAIRMAN'S STATEMENT

My statement this year, although reporting on the year ended 31 December 2010, is being written in March 2011.  Recent events have cast a shadow over what was a very satisfactory performance by the portfolio in 2010, and have created a more uncertain outlook, to which I shall return. But these should not overshadow what was a solid year of progress for ICGF both in terms of the underlying portfolio and the share price.

As noted at the interim stage, the restructuring process initiated by the Manager has been completed and the concentration risk and the liquidity risk within the portfolio reduced substantially. Despite this upheaval, the Company's NAV grew by 24.1 per cent in Sterling terms and by 14.6 per cent in local currency terms, against a comparable rise in the BSE Midcap Index (our notional benchmark) of 25.8 per cent and 16.1 per cent respectively.  Your Board regards this as a very satisfactory result; and we now have a broad portfolio of some 38 stocks balanced across all sectors of the economy.

Meanwhile, the share price recovery continued, with our shares showing the best performance of all the comparable Sterling closed-ended India focussed funds, finishing almost 50 per cent up on the year, with some healthy interest from new investors. In December we appointed a new team of advisers in London, Grant Thornton becoming our Nominated Advisor and Numis our broker. We look forward to working closely with these two institutions. 

Indian markets are particularly sensitive to foreign investment flows, and for most of 2010 remained an attractive investment destination, with a substantial net inflow of foreign institutional investment in India. Towards the end of the year, however, some home grown difficulties emerged. The eruption of the allegations of corruption in relation to the sale of telecommunications licences rocked the market in late 2010, coming at a time when investors were already concerned about inflation in India, and when the developed markets were beginning once again to look more attractive.  Since the year end, international investors have become more cautious over investment in India, although as yet there has been little net outflow.  Middle East uncertainty is feeding through into a rising oil price, to which the Indian economy is very exposed, as we saw in 2008, and this gives investors little comfort for the immediate future. In the first two months of 2011 the index of leading stocks, the BSE Sensex, has fallen by some 14 per cent. In the medium term, however, India's prospects remain bright, with the domestic consumption story as compelling as ever.

The Manager's report refers to the "extraordinary story" that India has become, and in January of this year I visited India to see this for myself, meeting a range of companies and commentators. I came away impressed by the dynamism and energy of local entrepreneurs, and in particular their ability to overcome India's still challenging infrastructural bottlenecks.  Investment in infrastructure is at last under way, and one can only guess at the impact that this cycle of investment will have in the productivity of the economy over the next decade. Not to be forgotten also is the "demographic dividend" which should, in due course, provide India with the most highly educated and youngest workforce of all the "New World" economies.

To return to the present, the thirst for regime change is spreading across North Africa and parts of the Middle East, with unpredictable outcomes. India, however, has had democracy for over 60 years now, built on Gandhi's philosophy of non-violence. Whatever the flaws in the political and administrative management of the country, the core democratic base is there. This, coupled with the likelihood of significantly higher growth over the next five years than the world in general, and the developed world in particular, should encourage investors to stay focused on India's long term growth prospects.

Fred Carr 

Chairman 

24 March 2011 

INVESTMENT MANAGER'S REPORT

Introduction

In 2010 India's equity markets continued to build on the gains of the previous year. After a rise of over 100 per cent in 2009 the BSE Midcap index closed up 16.1 per cent in 2010. The Sterling return was enhanced by a gain in the value of the Indian Rupee, rising 7.7 per cent over the period, bringing the Sterling adjusted index gain to 25.8 per cent. Similar returns could be found in both the large and small cap indices which were up 17.4 per cent and 15.7 per cent respectively in local currency terms. Against this backdrop the net asset value of the Company rose 24.1 per cent, 14.6 per cent from the growth in net asset value and 7.7 per cent from the strength in the Rupee. This was a satisfactory performance given the complete overhaul of the portfolio in the period. This overhaul was necessary, but caused considerable downward pressure on some existing holdings and resulted in high levels of cash waiting to be deployed, which detracted from performance in the rising market. A detailed discussion on the restructuring process and the performance of the portfolio is included later in this report.

Once again it was foreign investors that dominated the flows into the Indian markets, with net inflow at an all-time high of USD 29.4 billion for the year. In the main, emerging markets continued to be in the forefront of global investors' minds, attracted by better and longer term growth prospects as well as healthier public finances and low levels of personal debt. Despite some inevitable short term setbacks, we strongly believe this structural trend remains in place and India is the emerging economy best placed to capture this investment theme. 

Economy and Politics 

The Indian economy has maintained a healthy momentum for the financial year to date and is expected to achieve a real growth rate of close to 8.5 per cent for the full year to 31 March 2011 (FY2011). From the supply side perspective all areas of the economy made a positive contribution to the numbers. There has been strong growth in services and industry combined with a healthy pick up in agriculture. The quarter on quarter deceleration in industrial growth is principally due to the high base effect from last year, and a consequence of the Reserve Bank of India's gradual approach to the normalisation of monetary policy which commenced in mid-February. In addition, the heavy and prolonged monsoon season not only delayed the completion of on-going infrastructure projects, but was also one of the reasons why the government failed to reach its target for the disbursal of new projects over the period. Whilst this did not have a disastrous effect on the overall performance of the economy, it was nonetheless disappointing. The agricultural sector's strong showing did much to offset this. This was as a consequence of the low base effect from last year following the very poor monsoon, and a much improved rainy season in calendar 2010. The effect on rural incomes and thus consumption is positive and underpins our belief that FY2012 will be another year of healthy growth. 

There is an expectation that government spending on infrastructure will also pick up in the next financial year. The political motivation to achieve this is the approaching state elections, of which there are some critical ones in 2011, with the majority following in 2012. The overriding "takeaway" of this year's elections in the state of Bihar is that the incumbent Chief Minister was re-elected comfortably following the successful completion of much needed progress on infrastructure, particularly road development. This is some confirmation that voters who had historically voted along caste lines are now prepared to vote for a politician who "gets things done". As the Congress Party and their political allies were comprehensively thrashed in Bihar, it is hoped that infrastructure reform will feature high on the political agenda in the year ahead. Indeed in the recently announced Budget for FY2012, the Finance Minister has increased to USD 40 billion the amount in which foreigners can invest in corporate bonds by specifically raising the limits in the infrastructure sector , as well as increasing the tax incentives for both domestic and foreign entities to increase exposure to this sector. This is a sensible step, but the reality is that more investment in the sector will only come once the bureaucracy enables simpler and speedier execution, particularly around land clearance and environmental approval. In this budget there were no new announcements on either.

The IMF's recently published report forecasts that India should maintain a similar level of growth in FY2012 to that expected in FY2011 of approximately 8.5 per cent. The composition of this growth may vary slightly, as it is unlikely that the contribution from agriculture will be maintained, but this is likely to be offset by solid growth in industry and services. Surging capital flows could further spur investment as the effects of excessively weak US monetary policy encourages capital flight overseas in search of better yields. Although this will complicate macroeconomic management, it is our belief that India is in a better shape than most Asian countries to absorb these potential flows.

The over-riding economic concern for investors in 2010 has been high and sticky inflation, principally in the areas of food and imported raw material prices, including oil. The former is a highly emotive issue and a matter of concern for all as the poor and those on fixed incomes are the worst affected. The increased demand for better quality food products (mainly protein) is a natural consequence of rising prosperity and urbanisation, but it is the chronic failure of the supply side response that is also to blame for rising prices - and this is not about to change. Enhancing farmers' output and productivity and transforming the supply chain are major challenges for the Indian government in FY2012 and beyond. Increasing crop yields via better use of fertilisation and irrigation, and improving cold storage facilities, transportation and handling to reduce leakage and wastage are vital to ensuring food inflation does not become a long term structural consequence of India's recent growth.

It is well understood that monetary policy has little effect in controlling food inflation. The principal concern of the Reserve Bank of India, however, is that the pickup in food prices feeds into core inflation via upward pressure on wages. This challenge will remain at the forefront of policy makers' minds throughout next year. The economy is also at risk from imported raw material prices driving up manufacturing costs. The real fear here is that on-going loose monetary policy from the United States Federal Reserve and further quantitative easing will force higher commodity prices globally, which for India, as a net importer, will negatively affect its terms of trade as well as further fuelling inflation.

With these issues in mind and with the normalisation of interest rate policy announced in early 2010, the Reserve Bank of India hiked interest rates six times in 2010. Towards the end of the year, and on account of an unexpected uptick in food inflation, the market began to fear that interest rates would need to move even higher to contain these pressures. This concern will be in vogue throughout the next financial year particularly as the government's official target for inflation has been raised from 5.5 per cent to 7 per cent.

Since the financial crisis of 2008 monetary policy choices have been reasonably straightforward. Low inflation and fears of anaemic economic growth made an accommodative stance the only sensible option. Now, as the economy has fully recovered and inflation has surged, the situation has become less clear. Policy makers face the classic central bank dilemma: how to find the right level of interest rates to contain inflation risk without upsetting the momentum in economic growth. In this regard 2011 will be a challenging year for all those involved.

From a political standpoint it must be said that 2010 has been a disappointment. There were high hopes that this government, unencumbered by its previous communist coalition partner and with plenty of time before the next election, would be able to make meaningful progress. This was expected in the areas of tax reform, the partial sale of state owned companies, infrastructure development as well as the liberalisation of foreign domestic investment limits in key sectors. As the year advanced the market became increasingly frustrated with the lack of progress. The final straw was a succession of damaging scandals in the areas of telecoms and banking, which highlighted corruption and collusion in the high echelons of both business and politics. In a sense it can be argued that forcing these issues into the open is a positive, as this degree of negative publicity forces change in the system, but in the near term it knocks foreign investor confidence and this takes time to rebuild. We are hopeful that calendar year 2011 will deliver some of what the Government has so far failed to achieve. We believe that the introduction of the general sales tax and the implementation of the direct tax code (with some amendments) should happen. Additionally, politicians have indicated that the partial sale of some public sector assets is planned to help reduce the fiscal deficit. With market frustration abundant here, any whiff of progress will be taken very positively.

Portfolio restructuring 

In the 2009 annual report it was reported that a thorough review of the investment process and the portfolio would commence in January 2010. Over the year this has been the main focus of the investment team and considerable progress has been made. Whilst the original brief of a mid and small cap focus has been maintained, a disciplined and thorough investment process has been introduced in an attempt to improve the overall performance of the portfolio. The key aspects of these changes are listed briefly below: 

-    A liquidity screen was introduced to seek to ensure the portfolio positions can be exited in a timely manner; 

-    Portfolio concentration would be reduced in order to diversify risk. A target portfolio of around 35 stocks was set;

-    An active bottom up stock picking approach has been adopted using economic profit analysis as the  principal valuation tool;

-    Individual stock positions are regularly reviewed and performance analysed; 

-    Although the absolute return mandate has been maintained, the BSE Midcap index was selected as a means by which performance relative to the market can be measured. 

As at the end of December 2010 the number of stocks in the portfolio has been increased from 15 to 38, in line with the target set at the beginning of the year. Of the fifteen positions in the portfolio at 31 December 2009, six have been sold in full, while the exposure to the remaining "legacy" stocks (excluding the unlisted portion) has been reduced considerably. We will continue to use market opportunities to sell down further where concentration is still considered too high. Three unlisted companies were held in the portfolio at the end of 2010. Marwadi Shares and Finance Limited is the largest position in the portfolio at 8.4 per cent, and continues to be a core holding. Of the residual two, CitiXsys continues to be valued at nil. The small holding in Jubilant Industries arose from a spin off from Jubilant Life Sciences Limited, a current holding, and was pending listing at 31 December 2010. Listing was granted in early 2011 and the holding was subsequently sold. 

As a result of these actions the liquidity position has improved substantially. The weighted average liquidity of the listed portfolio (measured by the number of days it would take to liquidate the portfolio) has fallen to six days as at the end of the year. Whilst the restructuring of the portfolio is not quite complete, the market's performance in 2010 gave us the ideal opportunity to carry out the much needed restructuring and it is pleasing that significant progress was made based on then market volumes.

Performance 

Within the portfolio, positive contribution to the growth in the net asset value over the year came from the consumer discretionary, materials and telecommunications sectors, whilst the industrials, healthcare and financials sectors contributed negatively. The cash position, together with the unlisted component of the portfolio for which the valuations were unchanged throughout the year, averaged 23.7 per cent of net assets and this was the largest contributor to negative attribution owing to the overall strength of the market.

Within the Consumer Discretionary sector, both S Kumars Nationwide (10.54 per cent average weighting over the year) and Prime Focus (6.5 per cent average weighting over the year) performed well rising 102.5 per cent and 169 per cent for the year respectively. The former has benefited from good earnings growth, improved dialogue with the market and most importantly the announcement of the planned listing of its subsidiary Reid & Taylor. We still see upside in the company's share price in spite of its strong performance and are delighted that it is taking steps to unlock value for shareholders. Prime Focus has benefited from the huge pick up in the production of 3D films from Hollywood. The company's leading ViewD product provides 2D to 3D conversion technology faster and at lower cost than the competition. This competitive edge exists because it is able to outsource most of the work to India where the overall production costs are that much lower. The order backlog is growing as profits achieved on the 3D format for Hollywood are still superior to the traditional format. We also expect that the growth in supply of 3D televisions, principally from the Japanese manufacturers, may create additional demand for Prime Focus' technology as broadcasters struggle to find 3D content to satisfy consumer demand. 

In other areas of the economy the portfolio benefitted from exposure to the recent acquisition of Bhushan Steel, a supplier of high grade steel to the auto and white goods manufacturers, which rose 54per cent from the initial purchase. Elsewhere, Jain Irrigation, a producer of micro irrigation systems, rose 20 per cent, and MSK Projects, a construction company, rose 55 per cent. The latter position was sold following its acquisition by the Welspun Group in the early part of the year. In Healthcare, Bilcare, a legacy stock and significant position (7 per cent average over the year) rose 24 per cent. New portfolio entrant Shriram Transport, a financier of commercial vehicles rose 60 per cent. 

As has already been mentioned the largest contribution to the negative attribution came from the high cash weighting in the portfolio, which averaged 14.9 per cent over the year. This was the consequence of the introduction of the new investment process as all portfolio positions were reviewed and new investment ideas sought. Elsewhere much of the downside contribution came from the sale of "legacy" stocks. Arihant Foundations and Housing, a Chennai based real estate company, which is the last of the "legacy" stocks in the portfolio, fell 31 per cent. Although the Group's exposure to this company has fallen over the period from 2.8 per cent to 1.4p per cent, our ability to exit completely is hampered by extremely low levels of liquidity.

The area of the portfolio initiated this year which has disappointed is the Industrial sector. Infrastructure development is one of the most interesting structural themes that exist in the Indian context and we had high hopes for portfolio companies exposed to the construction of roads, irrigation and sanitation projects, metros and low cost housing in particular. To date this has not worked for a number of reasons. The government has been very slow to award new projects and this has resulted in order book growth failing to meet expectations. It has also resulted in fewer and smaller "ticket" sizes increasing the competition and reducing profits. The completion of existing projects has also been delayed due to poor weather which has increased working capital costs and delayed the revenue streams. Throughout the year analysts have been forced to reduce their estimates for earnings and this has resulted in heavy selling pressure in the market. As noted earlier in this report we are confident that the situation will improve in calendar year 2011 as the weather permits, and the government starts to award an increasing number of new orders. We remain exposed to this area and will continue to monitor progress carefully.

Conclusion

Concerns over inflation and corporate governance stalked the market towards the end of the year causing investors to book healthy profits after a good run. These fears have extended into calendar year 2011 as the market worries that growth will moderate to contain rising inflation, and borrowing costs will continue to rise, crimping profits and delaying investment plans. Additionally there are concerns that the economy is facing the prospect of higher imported commodity and fuel costs as a consequence of loose US monetary policy, an improvement in global growth expectations and uncertainty in the Middle East. Added to this there is a current shift in sentiment away from emerging markets towards the developed space following a sustained period of emerging market outperformance. Concerns over rising inflation in the Asian economy as a result of economic policy in the West is the main catalyst, but it is being supported by improving economic data in the United States and developed market valuations that are looking attractive once again. In this context India is suffering particularly as it is not perceived as a main beneficiary of a recovery in US exports. All these issues are relevant and a natural concern for foreign investors who continue to dominate the volumes. 

At the time of writing it is not clear to what extent these fears will last, but it is likely that investors will remain cautious for the time being, at least until the mist clears. Although a portion of the capital that was invested into Indian equities last year is being withdrawn, our sense is that the majority is medium to long term investment that will successfully ride out this short term uncertainty. All these are near term issues and part and parcel of equity investing. They should not detract from the extraordinary investment story that India has become. The "demographic dividend" (as the growth in the working population is commonly called) is expected to increase the savings ratio to close to 40 per cent over the next few years. This figure could be further enhanced with the release of savings currently held outside formal banking channels as the economy moves forward. In addition it is expected that the Government will gradually lift restrictions on the inflow of foreign capital to the country, at a time when other emerging economies are taking an opposite tack. These trends should enable India to grow its GDP in excess of 10 per cent for a sustained period, thus creating numerous opportunities to investors in the domestically focused areas of consumption, financial services, infrastructure development and more. It is this rapid growth that continues to make India an attractive investment opportunity for overseas investors especially in the environment of continued sub-par growth in the developed world.

INVESTMENT POLICY

The Group's investment objective is to provide long-term capital appreciation by investing (directly and indirectly) in companies based in India. The investment policy permits the Group to make investments in a range of Indian equity and equity linked securities and predominantly in listed mid and small cap Indian companies with a smaller proportion in unlisted Indian companies. Investment may also be made in large-cap listed Indian companies and in companies incorporated outside India which have significant operations or markets in India. While the principal focus is on investment in listed or unlisted equity securities or equity linked securities, the Group has the flexibility to invest in bonds (including non-investment grade bonds), convertibles and other types of securities. The Group may, for the purposes of hedging and investing, use derivative instruments such as financial futures, options and warrants. The Group may, from time to time, use borrowings to provide short-term liquidity and, if the Directors deem it prudent, for longer term purposes. The Directors intend to restrict borrowings on a longer term basis to a maximum amount equal to 25 per cent of the net assets of the Group at the time of the drawdown. It is the Group's declared policy not to hedge the exposure to the Indian Rupee.

PRINCIPAL GROUP INVESTMENTS

AS AT 31 DECEMBER 2010

HOLDING	TYPE	SECTOR	VALUE £000	% of PORTFOLIO
Marwadi Shares & Finance Limited	Unlisted	Financials	4,630	8.35
Prime Focus Limited	Small Cap	Consumer discretionary	4,412	7.96
S Kumars Nationwide Limited	Mid Cap	Consumer discretionary	4,298	7.75
Bilcare Limited	Small Cap	Healthcare	3,216	5.80
United Phosphorus Limited	Mid Cap	Materials	2,225	4.01
Jyoti Structures Limited	Small Cap	Industrials	1,719	3.10
Bharti Airtel Limited	Large Cap	Telecommunications	1,579	2.85
IVRCL Infrastructures & Projects Limited	Mid Cap	Industrials	1,436	2.59
Yes Bank Limited	Mid Cap	Financials	1,391	2.51
Opto Circuits (India) Limited	Mid Cap	Healthcare	1,356	2.44
Total top 10 equity investments			26,262	47.36
Other Small Cap	(8 companies)		7,589	13.69
Other Mid Cap	(11 companies)		10,150	18.31
Other Large Cap	(7 companies)		8,156	14.71
Other Unlisted	(2 companies)		15	0.03
Total equity investments			52,172	94.10
Cash less other net current liabilities			3,272	5.90
Total Portfolio			55,444	100.00

Note:

Large Cap comprises companies with a market capitalisation above INR 100 billion (£1.4 billion)

Mid Cap comprises companies with a market capitalisation between INR 15 billion and INR 100 billion (£215 million - £1.4 billion)

Small Cap comprises companies with a market capitalisation below INR 15 billion (£215 million)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

						Year to	Year to
						31.12.10	31.12.09
				Revenue	Capital	Total	Total
				£000	£000	£000	£000
Income
Interest income				1	-	1	2
Investment income				232	-	232	292
				233	-	233	294
Net gains on financial assets at fair value through profit or loss
Market movements				-	7,180	7,180	19,746
Foreign exchange movements				-	4,838	4,838	(6,328)
				-	12,018	12,018	13,418
Total income				233	12,018	12,251	13,712
Expenses
Management fee				(787)	-	(787)	(535)
Cost of acquisition and disposal of investments				-	(277)	(277)	(31)
Foreign exchange gains/(losses)				60	(21)	39	(161)
Other expenses				(469)	-	(469)	(450)
Total expenses				(1,196)	(298)	(1,494)	(1,177)
Profit/(loss) for the year before taxation				(963)	11,720	10,757	12,535
Taxation				-	-	-	-
Profit/(loss) for the year after taxation				(963)	11,720	10,757	12,535
Earnings per Ordinary Share - Basic (pence)						14.34	16.71
Earnings per Ordinary Share - Diluted (pence)						14.34	16.71

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. The profit after tax is the "total comprehensive income" as defined by IAS 1. There is no other comprehensive income as defined by IFRS. All the items in the above statement derive from continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

			Capital			Other
		Share Capital	Realised Reserve	Unrealised Reserve	Revenue Reserve	Distributable Reserve	Total
		£000	£000	£000	£000	£000	£000
Balance as at 1 January 2010		750	(13,187)	(13,818)	(1,936)	72,877	44,686
Issue of ordinary shares		-	-	-	-	1	1
Gain/(loss) on investments		-	(12,826)	20,006	-	-	7,180
Revenue loss for the year after taxation
(excluding foreign exchange losses)		-	-	-	(963)	-	(963)
Cost of acquisition and disposal		-	(119)	(158)	-	-	(277)
of investments
Gain/(loss) on foreign currency		-	6,820	(2,003)	-	-	4,817
Balance as at 31 December 2010			(19,312)	4,027	(2,899)	72,878	55,444

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

			Capital			Other
		Share Capital	Realised Reserve	Unrealised Reserve	Revenue Reserve	Distributable Reserve	Total
		£000	£000	£000	£000	£000	£000
Balance as at 1 January 2009		750	2,689	(43,073)	(1,092)	72,877	32,151
Gain/(loss) on investments		-	(18,283)	38,029	-	-	19,746
Revenue loss for the year after taxation
(excluding foreign exchange losses)		-	-	-	(844)	-	(844)
Cost of acquisition and disposal		-	(29)	(2)	-	-	(31)
of investments
(Loss)/gain on foreign currency		-	2,436	(8,772)	-	-	(6,336)
Balance as at 31 December 2009		750	(13,187)	(13,818)	(1,936)	72,877	44,686

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2010

			31.12.10		31.12.09
			£000		£000
Non-current assets
Financial assets designated at fair value through profit or loss			52,172		43,394
Current assets
Cash and cash equivalents			3,429		1,434
Receivables			10		10
			3,439		1,444
Current liabilities
Payables			(167)		(152)
Net current assets			3,272		1,292
Total assets less current liabilities			55,444		44,686
Equity
Ordinary share capital			750		750
Reserves			54,694		43,936
Total equity			55,444		44,686
Number of Ordinary Shares in issue			75,001,463		75,000,063
Undiluted Net Asset Value per Ordinary Share (pence)			73.92		59.58
Fully diluted Net Asset Value per Ordinary Share (pence)			73.92		59.58

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2010

			Year to		Year to
			31.12.10		31.12.09
			£000		£000
Cash flows from operating activities
Investment income			232			292
Fixed deposit interest			-			1
Bank interest			1			1
Management fee			(773)			(519)
Other cash payments			(488)			(498)
Net cash outflow from operating activities			(1,028)			(723)
Cash flows from investing activities
Purchase of investments			(46,617)			(10,962)
Sale of investments			49,856			9,872
Transaction charges relating to the purchase and sale of investments			(277)			(31)
Net cash inflow/(outflow) from investing activities			2,962			(1,121)
Cash flows from financing activities
Proceeds from issue of shares			1			-
Net cash inflow from financing activities			1			-
Net increase/(decrease) in cash
and cash equivalents during the year			1,935			(1,844)
Cash and cash equivalents at the start of the year			1,434			3,431
Exchange gains/(losses) on cash and cash equivalents			60			(153)
Cash and cash equivalents at the end of the year			3,429			1,434

This preliminary announcement was approved by the Board on 24 March 2011. It is not the Company's statutory accounts, but has been prepared on the same basis as those accounts. The statutory accounts for the year ended 31 December 2010 have been approved and audited and received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report.

The full Annual Report together with the audited accounts for the year is expected to be mailed to shareholders on 30 March and a copy will be posted on the Company's website www.indiacapitalgrowth.com in accordance with AIM Rule 26.

Disclaimer: Neither the contents of the Company's website, nor the contents of any website accessible from hyperlinks on the Company's website (or any other website), is incorporated into, or forms part of, this announcement.

Enquiries:

India Capital Growth Fund Limited
Northern Trust International Fund Administration Services (Guernsey) Limited (Secretary)
Andrew Maiden	01481 745368
India Investment Partners Limited (Manager)
David Brunner	020 7802 8907
Grant Thornton UK LLP (NOMAD)
Philip Secrett	020 7728 2578
Numis Securities Limited (Broker)
Hugh Jonathan
Nathan Brown	020 7260 1000

 

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