Net Asset Value(s)

RNS Number : 0717J

India Capital Growth Fund Limited

06 September 2016

 

6 September 2016

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

Net Asset Value statement at 31 August 2016

Net Asset Value

The Company announces its Net Asset Value per share as at 31 August 2016 was 91.5 pence.

In August the Net Asset Value (NAV) was up 2.8% in Sterling terms, whilst the BSE Mid Cap Total Return Index was up 5.3%, delivering an under performance against the notional benchmark of 2.5%. In local currency terms, the NAV was up 2.1% for the month.

Following the exercise of Subscription Share rights on 6 August 2016, a further 37,500,710 Ordinary Shares were issued in the month at 61 pence per share. The Company's Ordinary Shares in issue now totals 112,502,173.

Portfolio update

Positive attribution to the portfolio's performance came from Dewan Housing (up 30.2%), Indian Bank (up 42.4%), Yes Bank (up 12.3%) and Finolex Cables (up 12.9%). Negative attribution came from Welspun India (down 52.4%), Sobha Developers (down 13.9%) and Lupin (down 14.8%).

Market and economic update

The Indian equity market continued to rally; the BSE Sensex rose 1.4% whilst the BSE Mid Cap Index was up 4.4%. Markets were supported by the ongoing monsoon and successful passage of the Goods and Services Bill (GST) through the Upper House. The Government announced the appointment of Urijit Patel (currently Deputy Governor) to succeed Raghuram Rajan as Governor of the Reserve Bank of India (RBI) signalling continuity of current policy regime, expected to reassure investors and rating agencies alike. Foreign Institutions were net buyers (US$1.5bn for the month), while domestic institutions were net sellers (US$464m for the month). The Indian currency appreciated 0.1% against the US Dollar and 0.7% against Sterling.

After eight years of discussion, GST was finally approved by Parliament and further ratified by 17 Indian states, an additional requirement to turn the bill into a law (50% minimum state ratification). The Government has set a deadline of April 2017 for the GST rollout, which may be optimistic. The VAT based tax system is expected to enhance GDP growth in the medium term by removing the multiplicity of taxes and enhancing the efficiency of the manufacturing sector.

In the monetary policy review, the RBI kept the rates unchanged as June consumer price inflation rose to 6.1%, led by higher food prices. However inflation forecasts for March 2017 have been left at 5%, as it is expected that food prices will moderate in the months ahead as the beneficial effects of the monsoon filter through to the end consumer.

GDP in the 1Q ended June'16 grew 7.1%. This is the slowest in six quarters, dragged down by mining - 0.4% (8.5% 1Q15) and construction 1.5% (4.5% 1Q15), seasonally impacted by the timely arrival of the monsoon. Agriculture also slowed down to 1.8% (2.6% 1Q15) while manufacturing, electricity and services sector outperformed. Full year GDP forecasts remain broadly unchanged at 8% as the expected pickup in both agricultural output and consumption is likely to provide an additional fillip to this year's number.

Indian companies continued reporting the results for Q1 FY17 ended June 2017. In essence Materials, Cement, Auto and Energy companies outperformed expectations while IT Services, Consumer Staples and Healthcare companies have disappointed. Public Sector Banks' profitability continued to be impacted as overall asset quality deteriorated further, however the pace of slippages has slowed down from the previous quarter. These are expected to moderate in the coming quarters on the back of a good monsoon and higher commodity prices, though stock prices are largely reflecting this. The main board (BSE Sensex) is currently trading at current year price earnings multiple of 18x whilst the mid caps (BSE Mid Cap) continue to trade at 20x.

Portfolio analysis by sector as at 31 August 2016
Sector	No. of Companies	% of Portfolio
Financials	9	27.0%
Materials	8	16.5%
Consumer Discretionary	7	14.1%
Industrials	5	11.2%
Healthcare	4	8.2%
Consumer Staples	4	7.3%
IT	2	4.7%
Total Equity Investment	39	89.0%
Net Cash		11.0%
Total Portfolio	39	100.0%
Top 20 holdings as at 31 August 2016
Holding	Sector	% of Portfolio
Yes Bank	Financials	5.8%
Dewan Housing	Financials	4.9%
Federal Bank	Financials	4.7%
Jyothy Laboratories	Consumer Staples	4.0%
Kajaria Ceramics	Industrials	3.8%
Dish TV India	Consumer Discretionary	3.6%
PI Industries	Materials	3.4%
Indusind Bank	Financials	3.3%
Divis Laboratories	Healthcare	3.2%
Berger Paints India	Materials	3.2%
City Union Bank	Financials	3.1%
Max Financial Services	Financials	3.1%
Finolex Cables	Industrials	3.1%
Sobha Developers	Financials	3.0%
The Ramco Cements	Materials	2.9%
Exide Industries	Consumer Discretionary	2.8%
Motherson Sumi Systems	Consumer Discretionary	2.8%
Tech Mahindra	IT	2.7%
NIIT Technologies	IT	2.6%
Essel Propack	Materials	2.5%
Portfolio analysis by market capitalisation size as 31 August 2016
Market capitalisation size	No. of Companies	% of Portfolio
Small Cap (M/Cap < INR60bn)	15	25.7%
Mid Cap (INR60bn < M/Cap < INR250bn)	15	39.1%
Large Cap (M/Cap > INR250bn)	9	24.2%
Total Equity Investment	39	89.0%
Net Cash		11.0%
Total Portfolio	39	100.0%

 

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