Net Asset Value(s)

RNS Number : 9377T

India Capital Growth Fund Limited

06 October 2010

 



India Capital Growth Fund Limited

06 October 2010

India Capital Growth Fund Limited (the "Company" or "ICGF")

30 September 2010 NAV Statement

Net Asset Values

The Company announces its net asset values per share as at 30 September 2010:

Net asset value per share - undiluted                  76.98 pence

Net asset value per share - fully diluted              76.98 pence

Portfolio update

The net asset value (NAV) rose 8.1% in September to 76.98 pence per share. In local currency terms the NAV rose 6.0% for the month compared to the 6.4% rise in the BSE Midcap index. The broader index (BSE Sensex) rallied 11.7%. The Rupee appreciated against the sterling by 2.1% turning around from its weakness in August. This can be attributed to two principal factors.  First, there was a further strong inflow from FIIs of $5.4bn for the month (as reported by SEBI). Secondly, the Indian Government has raised the limit for FII investment in Government Securities and Corporate Bonds by USD 5bn each.

The portfolio ended the month with 36 stocks and an invested position of 92.0% compared to 84.5% in the previous month. The weighting of cash and unlisted investments in the portfolio remains a drag on the portfolio's performance in the rising market. Three new positions were initiated during the month, while a full exit has been made from two companies.

The principal contributors to the positive performance in the month were the healthcare, financials and consumer discretionary sectors. Bilcare Limited (innovative pharmaceutical packaging, 6.6% weight) rose a further 29% following its 21% rise in August. Prime Focus (post production and visual effects for the film and advertising markets, 8.1% weight) also continued its sharp rise with a gain of 19% on the back of 2D to 3D conversion orders. In Financials, Federal Bank (weight 2.2%) rose 15.3%. This Kerala based bank has a diversified loan book, with 40% of it exposed to corporate advances, 30% to SME advances and 31% to retail advances. It has one of the highest net interest margins in the industry (at 4.2% in 1QFY11,); this is mainly due to a high tier-1 capital and it having a high proportion of NRI deposits in its liabilities portfolio.  Elsewhere, Bharti Airtel (weight 3.8%) rose 11.9%. India's largest mobile operator is benefitting from improved tariff stability and rising usage in India in its 2G network and is rolling out its new 3G network. It is also poised to benefit from its recent acquisition in Africa. Bhushan Steel (weight 2.3%) rose 14.3%.  It is India's leading value-added producer of steel used in the automobile and white goods sectors and has extended its presence in the steel value chain with the commissioning of a new hot rolled steel plant.  It has moved from being a steel converter to a leading primary producer of steel which going forward is expected to improve margins.

In addition to the weighting of cash and unlisted securities totalling 15.8% of the portfolio, the performance of the portfolio was held back by two factors. As noted last month, although the exposure to the financial sector has increased, we remain underweight in this strongly performing sector.  Portfolio heavyweight, S Kumars Nationwide (a manufacturer of consumer textiles, 8.0% weight) stabilised after the fall in August, but was up only 0.3% during the month.

Outlook

The Indian equity market continues to outperform its emerging market peers, in large part due to increasing FII inflows and improving macro fundamentals. We expect this to continue as the Indian economy remains in a sweet spot, with favourable macro-economic news flow. 

·     GDP growth momentum is set to remain strong: India's Finance Ministry projections suggest that India's economic growth may surpass the 8.5% to 8.75% forecast for the current financial year, allowing scope for a reduction in stimulus measures that should help restrain the debt burden.

·     Inflation is expected to ease: India's wholesale-price-index (WPI) inflation slowed to 8.5% in August, down from 9.8% in July under the new index which includes a wider range of consumer goods.  Initial estimates of the kharif (summer) crop production released by the Ministry of Agriculture indicate output at 114.6 million tonnes, up 10.4% from the prior year. The robust kharif crop should result in some moderation in food price inflation. India's industrial production was also up 13.8% year-on-year in July against 5.8% in June arising mainly from a 63% jump in output of capital goods.

·     Good monsoons with season-to-date rainfall 2% above the long term average (compared to a deficit of 23% in 2009) further stimulating already rising aggregate domestic demand.

Analysis of holdings at 30 September 2010

Sector Summary	No. of Companies	% of Portfolio
Financials	11	25.8%
Industrials	9	16.3%
Consumer Discretionary	2	16.1%
Health Care	3	10.7%
Materials	4	10.5%
Telecom Services	2	6.6%
Energy	1	3.0%
IT	3	2.0%
Consumer Staples	1	1.0%
Total Equity Investment	36	92.0%
Net Cash		8.0%
Total Portfolio		100.0%

Top 10 equity holdings at 30 September 2010

Holding	Sector	% of Portfolio
Prime Focus	Consumer Discretionary	8.1%
S. Kumars Nationwide	Consumer Discretionary	8.0%
Marwadi Shares and Finance	Financials	7.8%
Bilcare	Health Care	6.6%
United Phosphorus	Materials	3.9%
Bharti Airtel	Telecom Services	3.8%
IVRCL Infrastructures & Proj	Industrials	3.0%
Cairn India	Energy	3.0%
Sterlite Industries	Materials	2.9%
Onmobile Global	Telecom Services	2.8%

Portfolio breakdown by size at 30 September 2010  

Size	No. of Companies	% of Portfolio
Small Cap  (M/Cap <INR 15bn)	12	30.3%
Mid Cap (INR 15bn <M/Cap<INR 100bn)	14	34.5%
Large Cap (M/Cap > INR 100bn)	8	19.4%
Unlisted	2	7.8%
Cash/Cash Equivalent		8.0%
Total	36	100.0%

 

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