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ASHOKA INDIA EQUITY INVESTMENT TRUST
Quarterly Report • Oct 17, 2024
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Quarterly Report
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RNS Number : 5041I
Ashoka India Equity Investment Tst
17 October 2024
ASHOKA INDIA EQUITY INVESTMENT TRUST PLC
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2024
Investment Objective, Financial Information and Performance Summary
Investment Objective
The investment objective of the Ashoka India Equity Investment Trust plc (the "Company") is to achieve long-term capital appreciation, mainly through investments in securities listed in India and listed securities of companies with a significant presence in India.
Financial information
| As at 30 June 2024 | As at 30 June 2023 | |
| Net asset value ("NAV") per Ordinary Share (cum income) | 279.3p | 206.2p |
| Ordinary Share price | 284.0p | 209.0p |
| Ordinary Share price premium to NAV1 | 1.7% | 1.4% |
| Net assets | £435.4million | £232.6million |
| \=========== | \=========== |
Performance summary
| Year ended 30 June 2024 % change |
Year ended 30 June 2023 % change |
|
| Share price total return per Ordinary Share 1,2 | 35.9% | 19.4% |
| NAV total return per Ordinary Share 1 | 35.5% | 18.3% |
| MSCI India Investable Market Index ('IMI') total return (sterling terms) 2,3 | 37.7% | 11.8% |
| \========= | \========= |
1 These are Alternative Performance Measures.
2 Total returns in sterling for the year ended 30 June 2024 and 2023.
3 Source: The Company's Factsheet as at 30 June 2024.
Alternative Performance Measures ("APMs")
The disclosures as indicated in the footnote above represent the Company's APMs. Definitions of these APMs and other performance measures used by the Company, together with how these measures have been calculated, can be found below.
STRATEGIC REPORT
Chairman's Statement
Welcome to the sixth annual results of Ashoka India Equity Investment Trust plc for the year to 30 June 2024.
As you will know only too well, conditions for investment managers to concentrate and produce positive returns for their shareholders have not become any easier in the last 12 months as tensions persist worldwide, whether geopolitical or economic. Perhaps being based in Mumbai and Singapore provides an element of shelter from the cacophony of this rather mad world in which we all currently reside and, if so, the high regard in which my fellow Directors and I hold the Company's Investment Manager and Adviser grows by the day.
To underline this, it is particularly pleasing to report that, global uncertainty notwithstanding, Acorn Asset Management and White Oak Capital Management (Investment Manager and Adviser respectively), produced a first-rate performance for the year under review. The five-year and since-launch numbers are particularly impressive.
Performance
The Company's net asset value (NAV) increased by 35.5% during the year 1 July 2023 to 30 June 2024 against the return from the MSCI India IMI (the untaxed benchmark index in sterling terms) of 37.7%, a modest underperformance of 2.2%; over the same period, the Company's share price increased by 35.9%. Since the Company's inception in July 2018, the NAV has increased by 185.0% and the Company's share price by 184.0%, both comfortably ahead of the benchmark index which grew by 121.5% (all statistics in sterling terms). The Company's share price at year end stood at 284.0p, a 1.7% premium to NAV.
Since the end of the Company's 2024 financial year, the NAV has been strong; as at 14 October 2024, the latest practicable date before publication of this Report, the NAV was 290.03p and the share price stood at 279.0p, a discount of 3.8%.
Share Issuance
The Company continued to respond to demand, both from existing shareholders and new investors, to issue new shares at a small premium to the prevailing net asset value. In total, 43,084,585 new shares were issued during the year under review, raising a total of £107.5 million.
To facilitate continued share issuance, shareholders were asked to approve an authority to issue up to 150,000,000 new shares. Such approval was granted at a General Meeting held on 3 May 2024. Since year end, issuance has continued and, as at the date of this Report, there were 161,232,397 shares in issue.
Revenue and Dividends
The Company's principal objective is to provide returns through long-term capital appreciation, with income being a secondary consideration. Therefore, shareholders should not expect that the Company will pay an annual dividend, under normal circumstances. Whilst the portfolio does generate a small amount of income, this is used to defray running costs. However, if a sufficient surplus is generated, the Company may declare an annual dividend to maintain UK investment trust status. In the year under review, total surplus income amounted to £308,000. No dividend has been declared for the year.
Redemption Facility
The Company has a redemption facility through which shareholders are entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The Redemption Point for the Ordinary Shares this year was 30 September 2024.
As announced on 6 September 2024, the total number of ordinary shares in respect of which valid redemption requests were received for this Redemption Point was 358,340. It is anticipated that the Company's Corporate Broker, Peel Hunt, will successfully place these shares with buyers in the market to satisfy continuing demand.
Performance Fee
Investment performance has been outstanding since launch in 2018. In a vibrant economy, India's stock market has been one of the world's best, but I am very happy to report that this Company's performance has fared even better.
To remind shareholders of the Company's fee arrangements, no annual management fee is paid; the Investment Manager, Acorn Asset Management Ltd, is remunerated solely by means of a performance fee based on the level of performance relative to the Company's benchmark index, the MSCI India IMI (in sterling terms), over discrete three-year periods. The first such period ended on 30 June 2021 and the second on 30 June 2024. It is for this latest period that a performance fee is due to the Investment Manager. The amount due is £2,301,000 and full details of the performance fee can be found below. I further remind shareholders that any performance fee liability is fully accrued in the daily NAV calculation.
The Company's portfolio is actively managed and seeks an excess return relative to its benchmark index (known as "alpha"). This investment style may lead to occasional greater volatility than the benchmark index but has produced outstanding returns for shareholders since inception. The Board remains fully supportive of this investment approach and remuneration structure.
Annual General Meeting
The Company will hold its Annual General Meeting at the offices of White Oak Capital Management Ltd at 13 Hanover Square, London W1S 1HN on 10 December 2024 starting at 10:45am. An on-line presentation will be given by the Investment Manager and the Board will be delighted to see all shareholders who are able to attend.
Outlook
It has been an incredible six-year period since this Company was launched in 2018. Nobody could possibly have foreseen what the world would soon be facing, both in terms of geopolitical risk and the global outbreak of an epidemic that brought it to a grinding halt. What was hoped for in India, however, but perhaps not anticipated to happen so quickly, was the beginning of a seismic shift in manufacturing from China to India but this reality, along with a dynamic domestic market, has set the country on an unprecedented growth trajectory. Believe me when I tell you that your Board spends some time at each quarterly meeting with the equivalent of a crystal ball in an attempt to foresee bumps in the road ahead. Nobody expects the trajectory to be unbroken or without such bumps but, right at this moment, with a (mostly) successful general election behind it, the Modi government looks set fair to continue on its path of growth and to improving the lives of all its citizens. A good example of this is demonstrated by India's fast-growing band of young entrepreneurs which, among other priorities, continues to power ahead with the construction of renewable energy sources, of particular significance to a country that otherwise relies upon its own coal reserves and imported oil for its energy supplies.
Perhaps not winning a "supermajority" at this year's election will prove no bad thing. Many see Modi as setting the scene for a 1000-year vision of India. Whilst this rhetoric may be stretching it, the reminder that he must rule for all Indians and not just the Hindu majority should be the reality jolt that all democratically elected leaders need.
I referred last year to the growing number of investable opportunities presenting themselves to our investment management teams as India's economy develops and new enterprises emerge. To fully capitalise on these opportunities, the Board agreed with the Investment Manager that the previous restriction on the number of positions that may be held in the portfolio should be lifted and recommended this change to shareholders, who subsequently approved it, at a General Meeting held on 3 May 2024. As ever, strong corporate governance and research continue to play prominent roles when selecting stocks for inclusion in the portfolio but your Board considers it vital that the investment teams have maximum flexibility to invest in and support the most dynamic areas of the Indian growth story.
Looking back to last year, I see I had hoped for a "period of stability, peace and calm" in the world. Sadly, this has failed as an aspiration. The war between Russia and Ukraine continues to see needless loss of life and the waste of enormous resources whilst the powder keg that is Israel/Palestine exploded into a harrowing conflict that, as I write, seems to have no end in sight. Both are tragic consequences of long-held ambition or animosity between nations.
Thankfully, the strains of inflation and higher interest rates experienced worldwide have abated, returning to long-term norms so that, at least, is good news. I am an optimist so always see the glass as half-full and whilst I believe the economic climate is improving, it would take heroic assumptions on my part to believe the world will be any more peaceful this time next year. We can but hope.
As ever, thank you for being a shareholder in Ashoka India. The country is exceptionally well placed to continue its long-term growth trajectory, whether or not the occasional "bump" appears. The Investment Manager and Adviser remain as dedicated as ever to their task and your Board equally confident in their ability to produce top quality returns for shareholders over the longer term.
ANDREW WATKINS
Chairman
16 October 2024
Investment Manager's Report
The MSCI India IMI (in sterling terms) was up by 37.7% during the year to 30 June 2024, outperforming the broader emerging markets and the developed markets. In the same period, the MSCI Emerging Markets Index was up by 13.2%, the S&P 500 returned 24.6%, and the MSCI World Index was up by 20.9% (all in sterling terms). Crude oil prices rose by 15.2% and the Indian rupee depreciated by 1.9%. Amongst sectors, utilities, real estate and industrials outperformed whilst consumer staples, financials and information technology underperformed.
Performance Review
The Company has delivered a sterling NAV total return of 35.5% during the year, underperforming the benchmark MSCI India IMI (in sterling terms) by 2.2%. Despite a turbulent market environment, the portfolio has generally performed closely to the benchmark.
During the three years to 30 June 2024, the company delivered a sterling NAV total return of 75.8%, outperforming the benchmark MSCI India IMI (in sterling terms) by 10.8%. Evaluated on both sector and market cap perspective, stock selection has been the key driver of performance over the last three years. While a bottom stock selection philosophy has led to a high magnitude of alpha (in both up and down markets), a balanced portfolio approach ensures the consistency of this alpha. A well-diversified portfolio based on bottom-up stock selection that is balanced across cyclicals and non-cyclicals has ensured that alpha does not get easily overwhelmed by non-stock specific risk factors over any reasonable medium to long time period.
The portfolio remains well diversified and balanced across both cyclical and counter-cyclical sectors while consciously avoiding market timing, sector rotation and other such top-down bets.
Key contributors & detractors for the year ended 30 June 2024
| Contributors | Portfolio Ending Weight (%) |
Portfolio Total Return (GBP)* |
| Azad Engineering Limited | 1.4 | +266.5 |
| CG Power & Industrial Solutions | 2.1 | +84.8 |
| ICICI Bank Limited | 5.8 | +28.0 |
| \========= | \========= |
| Detractors | Portfolio Ending Weight (%) |
Portfolio Total Return (GBP) |
| Aether Industries Ltd. | 0.4 | -14.5 |
| Navin Fluorine International | 0.6 | -21.2 |
| Onward Technologies Limited | 0.1 | -41.3 |
| \========= | \========= |
* Source data: FactSet
Contributors
Azad Engineering Limited manufactures highly engineered precision and machined components that are mission and life-critical. Hence, quite a few of the company's products have to meet stringent quality requirements. The company has a significant cost advantage compared to other global players and a large runway for growth. Its customers include global OEMs across the aerospace & defence, energy, and oil & gas industries, such as General Electric, Honeywell International, and Mitsubishi Heavy Industries. The industry has significant barriers to entry where a new entrant must obtain part-by-part qualifications, the time taken for which can extend up to four years. The stock has outperformed as the company has signed multiple agreements with new customers as well increasing its wallet share with existing customers. The company continues to move up the value chain with a recent contract for end-to-end manufacturing.
ICICI Bank is one of the leading private sector banks in India. Given the under-penetration of credit, the Indian banking sector offers a long runway for growth. Well run private sector banks, such as ICICI Bank are gaining market share from poorly run government owned banks, which account for two-thirds of the industry. The management team has been leveraging ICICI's wide distribution franchise, a new risk-based pricing approach, and digital offerings to accelerate market share and enhance the return ratios. The bank's asset quality has also remained robust. The stock has outperformed its peers on the back of continued strong business performance.
CG Power and Industrial Solutions , a part of the Murugappa Group (a leading industrial conglomerate), manufactures industrial, railways, and power transmission and distribution products. It is India's largest motor manufacturing company, with ~38% market share, and supplies a complete range of efficiency motors. The company also caters to the power transmission and distribution sector through its diversified transformers and switchgear product portfolio. It has recently launched a range of Fast-Moving Electrical Goods (FMEG) products such as fans and pumps. In addition, the company is developing motors for electric vehicles. The company has recently signed a joint venture agreement with global companies to enter the semiconductor value chain has made an acquisition in the railway domain. The above factors coupled with the strong operating performance delivered by the company over the last few quarters has led to the stock outperformance.
Detractors
Aether Industries , based in Surat (Gujarat, India), manufactures advanced intermediates and specialty chemicals involving complex and differentiated chemistry. The company's products find numerous applications across the pharmaceuticals, agrochemicals, material science, coating, high-performance photography, additive, and oil & gas segments of the chemical industry. Although long-term fundamentals remain strong, the near-term operating performance has been sluggish owing to prolonged slowdown in the global agrochemicals markets.
Navin Fluorine (NFIL) is a specialty chemicals company focusing on fluorine chemistry. It is present across the fluorine value chain, from inorganic fluorides to specialty chemicals and Contract Research and Manufacturing Services (CRAMS). The company is now focusing on high-end sustainable segments like CRAMS and specialty chemicals while simultaneously leveraging its other segments captively to achieve full integration. The company works closely with innovators and has a robust pipeline of molecules. The company has also been focusing on new value-added segments to cater to high-end customers with highly complex product needs. The near-term operating performance has been sluggish due to the global slowdown in the agro-chem industry due to channel overstocking coupled with demand slowdown. The decline in contribution from high value added segments such as Specialty chemicals has resulted in the stock's underperformance.
Onward Technologies is a technology services company focusing on ER&D services and digital technologies. When the current Managing Director of the company took over, the company had primarily a legacy business with resources largely deployed with Indian customers in a low billing rate environment. To prioritize the high-margin business, the company had let go of non-strategic clients and shifted its focus towards partnering with larger original equipment manufacturers (OEMs) with the goal of securing $10m accounts. The company also hired key sales leaders from leading peer companies like Tata Elxsi and L&T Technology Services, a step that has helped it acquire marquee global customers. The company was expected to increase its wallet share within these marquee accounts, which would have been likely to lead to robust free cashflow growth over the next few years. The stock, however, underperformed due to unexpected furloughs during late 2023, leading to weaker-than-expected operating performance.
Investment Outlook
India's economy delivered solid, above expectation gross domestic product ('GDP') growth of 8.2% for the fiscal year ending March 2024. Its healthy macro-economic fundamentals, resilient corporate earnings as well as promising growth prospects continue to garner strong foreign direct investment ('FDI') as well as portfolio flows. A moderating inflation trajectory and benign current account deficit opens up room for RBI monetary easing. Fiscal policy will likely remain in consolidation mode, driven by a pickup in tax revenues and improved rationalisation of government outlays even as capex spending will likely remain robust. The ongoing inclusion of Indian government bonds into the JP Morgan Bond index will also be supportive of local debt markets.
The recently announced General Budget for FY25 signaled the government's commitment to fiscal consolidation while continuing to fuel growth by boosting infrastructure investments. The gross fiscal deficit ('GFD') target was lowered to 4.9% of GDP for FY25 (5.1% in the Interim Budget) versus 5.6% in FY24. The Finance Minister also announced schemes to support fresh employment and skill development in manufacturing and other sectors, as well as a new credit guarantee scheme for supporting labour-intensive small and medium-sized enterprises. As part of the Indian government's Finance (No. 2) Act, 2024, which became effective in July 2024, the short-term capital gains tax ("CGT") rate increased from 15% to 20%, and the long-term CGT rate increased from 10% to 12.5% with no impact on returns/performance for the year ended 30 June 2024. However, it is expected that future returns/performance will be adversely affected to the extent of the CGT tax increases. The government also announced that it is working towards a comprehensive review of the Direct Tax Code, aimed at simplifying and consolidating the structure of direct taxes.
CPI inflation was broadly under control at 5.4% for the period June 2023 to June 2024 versus 6.1% in the period June 2022 to June 2023, driven by sharp moderation in core inflation. However, food inflation was volatile during this period. Nonetheless, RBI expects CPI inflation to further moderate to 4.5% in FY25, as core inflation is expected to remain benign. Commodity prices have also been modest in recent months. The progress of the monsoons has been normal and will aid in keeping food inflation in check.
India's external sector balance was under check with the current account deficit ('CAD') to GDP (CAD/GDP) at 0.8% in FY2024, with a marked improvement in the second half of the fiscal year. Services trade surplus and remittances provided considerable tailwinds to the external sector, aiding in the current account surplus in 4QFY24. Overall, external risks remain contained as India's external debt, at 19% of GDP, is amongst the lowest in the world, while RBI's forex reserves, at approximately USD690bn, is amongst the highest. Further, an underappreciated aspect is that the vulnerability of macro variables such as CAD due to a higher oil import bill has reduced materially over the years due to faster growth in services exports.
India's workforce is estimated to be nearly 600 million, of which 45% is employed in agriculture. To boost productivity, the government has prioritized investment-led growth to shift jobs from agriculture to higher value-addition in the manufacturing and services sectors. A large number of supply-side measures have also been initiated over the last decade such as (1) labor reforms, (2) reduction in corporate tax rates, (3) bankruptcy reforms, (4) strengthening financial and corporate balance sheets, (5) incentives for domestic manufacturing through Production Linked Incentive (PLI) scheme, among others. As a result, India has witnessed a steady increase in manufacturing gross value added ('GVA'), especially in new-age sectors such as electronics. Continued government support coupled with a favourable geopolitical scenario gives India strong tailwinds to scale manufacturing in several sunrise sectors. At the same time, India has also achieved a considerable degree of success in leveraging its skilled workforce to increase its services exports.
India's diverse corporate sectors and generally improving ROE suggests it will remain one of the best EM equity markets within which to capture sustained outperformance. Also noteworthy has been the corporate deleveraging and cleaning up of banks' balance sheets with a marked decline in non-performing loans. This in turn has kickstarted a recovery in private sector capex further enhanced by the government's extensive infrastructure investment upgrade. 'Made in India' is still in its very early stages, but the likes of Apple and Samsung are expanding local production with India clearly one of the major beneficiaries of global supply chain reconfiguration. Furthermore, the value of India's IT exports continues to rise providing a cushion to the external sector. Moreover, unlike some of its other large EM peers, India's economy is inherently much more consumption than investment driven, and the thrust of policymaking in recent years has been towards capacity building which is likely to ensure that economic growth is sustainable and broad-based and not propelled by a rise in leverage.
In view of these positives, the broader Indian equity market has seen a recovery rally over the last year. Valuations are at 22x one year forward earnings, as compared to the 10 year average of 20x for BSE Sensex. Although the market seems expensive, in the last 10 years, bar a few instances during market corrections between 2016 and 2020, India has consistently traded at a premium relative to other emerging markets. We never take a call on aggregate market valuations. What we are looking for are attractively valued businesses on a relative basis. Within the market, sectors or businesses trade at different valuations based on their respective risk-reward dynamics. It is the relative framework within which we identify investment opportunities. If a well governed, scalable business is able to generate superior returns on incremental capital, and if after factoring in a certain projected growth we see material upside from current stock price levels, then we will invest. From the lens of our proprietary Opco-Finco framework, which evaluates businesses' economic cash flow over and above the cost of capital, Ashoka India Equity Investment Trusts FY26 P/FCF multiple would be 35.1x as opposed to 39.7x for the Sensex, highlighting the portfolio's reasonable valuations in our view.
India offers a diversified sector exposure relative to its international peers, with a good mix of cyclical and counter cyclical businesses. Our approach has always been to maintain a balanced portfolio, to ensure that our portfolio's performance is driven by stock selection rather than non-stock specific risk factors such as market timing, beta, sector rotation and so on. Separately, from a political perspective, the recent Indian election result was a disappointment for the ruling Bharatiya Janata Party ('BJP'), although we are unlikely to witness any major change in the successful reform policies of recent years. At present, it looks like Narendra Modi will be the PM leading a stable coalition for the next five years which should be comforting for investors as it implies continuity of the policy framework and a pro-growth agenda. However, unlike the last 10 years when Modi's BJP held a majority on its own, this time BJP will have to govern alongside its alliance partners in the National Democratic Alliance ('NDA'). Given the dominance of BJP in the coalition, effective governance should not be a major issue, but might require more consensus building within the NDA coalition on some of the more pressing policy issues. Furthermore, any sustained weakness in global growth could weigh on market performance. On the other hand, a sharp reversal in anticipated global risk factors such as inflation, recession, or geopolitical tensions could boost investor sentiment. In conclusion, we remain optimistic and continue to believe the structural growth drivers of the Indian economy are deep rooted which, notwithstanding the near-term challenges, presents India as an attractive long-term investment opportunity.
ACORN ASSET MANAGEMENT LTD
Investment Manager
16 October 2024
Top Ten Holdings
| As at 30 June 2024 | Sector | Value (£'000) |
Percentage of net assets (%) |
| ICICI Bank | Financials | 26,207 | 6.0 |
| State Bank of India | Financials | 13,666 | 3.1 |
| HDFC Bank | Financials | 12,060 | 2.8 |
| Tata Consultancy Services | Information Technology | 10,403 | 2.4 |
| Ambuja Cements | Materials | 10,218 | 2.3 |
| Nestle India | Consumer Staples | 10,076 | 2.3 |
| Bharti Airtel | Communications Services | 9,848 | 2.3 |
| CG Power and Industrial | Industrials | 9,559 | 2.2 |
| Cholamandalam Financial Holdings | Financials | 9,239 | 2.1 |
| Bajaj Finserv | Financials | 9,204 | 2.1 |
| --------------- | --------------- | ||
| Top ten holdings | 120,480 | 27.6 | |
| --------------- | --------------- | ||
| Other holdings | 330,546 | 76.0 | |
| --------------- | --------------- | ||
| Total holdings | 451,026 | 103.6 | |
| \========= | \========= | ||
| Capital gains tax provision plus cash and other assets/(liabilities) | (15,587) | (3.6) | |
| --------------- | --------------- | ||
| Net assets | 435,439 | 100.0 | |
| \========= | \========= |
Investment Policy, Results and Key Performance Indicators
Revised Investment Policy
At a General Meeting held on 3 May 2024, Shareholders approved the following new Investment Policy.
The Company shall invest primarily in securities listed on any recognised stock exchange in India and securities of companies with a Significant Presence in India that are listed on stock exchanges outside India. The Company may also invest up to 10 per cent. of Gross Assets (calculated at the time of investment) in unquoted companies with a Significant Presence in India.
A company has a "Significant Presence in India" if, at the time of investment, it has its registered office or principal place of business in India, or exercises a material part of its economic activities in India.
The Company shall primarily invest in equities and equity-related securities (including preference shares, convertible unsecured loan stock, rights, warrants and other similar securities). The Company may also, in pursuance of the investment objective:
· hold publicly traded and privately placed debt instruments (including bonds, notes and debentures);
· hold cash and cash equivalents including money market liquid/debt mutual funds;
· hold equity-linked derivative instruments (including options and futures on indices and individual securities);
· hedge against directional risk using index futures and/or cash;
· hold participation notes; and
· invest in index funds, listed funds and exchange traded funds.
Notwithstanding the above, the Company does not intend to utilise derivatives or other financial instruments to take short positions, nor to increase the Company's gearing in excess of the limit set out in the borrowing policy, and any restrictions set out in this investment policy shall apply equally to exposure through derivatives.
The Company will invest no more than 15 per cent. of Gross Assets in any single holding or in the securities of any one issuer (calculated at the time of investment) and will typically invest no more than 40 per cent. of Gross Assets in any single sector (calculated at the time of investment).
The Company is not restricted to investing in the constituent companies of any benchmark. It is expected that the Company's portfolio will comprise a minimum of 50 investments.
In order to comply with the Listing Rules, the Company will not invest more than 10 per cent. of Gross Assets in other listed closed-ended investment funds, except that this restriction shall not apply to investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than 15 per cent. of their gross assets in other listed closed-ended investment funds. Additionally, in any event the Company will itself not invest more than 15 per cent. of its Gross Assets in other investment companies or investment trusts which are listed on the Official List.
The Company does not expect to take controlling interests in investee companies and will at all times invest and manage the portfolio in a manner consistent with spreading investment risk and in accordance with the FPI Regulations and applicable law.
It is expected that the Company's investments will predominantly be exposed to non-sterling currencies (principally Indian rupees) in terms of their revenues and profits. The base currency of the Company is Sterling, which creates a potential currency exposure. Whilst the Company retains the flexibility to do so, it is expected in the normal course that this potential currency exposure will not be hedged using any sort of foreign currency transactions, forward transactions or derivative instruments.
Borrowing policy
The Company may deploy gearing to seek to enhance long-term capital growth and for the purposes of capital flexibility and efficient portfolio management. The Company may be geared through bank borrowings, the use of derivative instruments that have the effect of gearing the Company's portfolio, and any such other methods as the Board may determine. Gearing will not exceed 20 per cent. of Net Asset Value at the time of drawdown of the relevant borrowings or entering into the relevant transaction, as appropriate.
No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution.
Asset allocation at year end
The breakdown of the top ten holdings and the industrial classification of the portfolio at the Company's year-end are shown above.
Dividend policy
The Board intends to manage the Company's affairs to achieve Shareholder returns through capital growth rather than income. Therefore, it should not be expected that the Company will pay an annual dividend.
Regulation 19 of the Investment Trust (Approved Company) (Tax) Regulations 2011 provides that, subject to certain exceptions, an investment trust may not retain more than 15 per cent. of its income in respect of each accounting period. Accordingly, the Company may declare an annual dividend from time to time for the purpose of seeking to maintain its status as an investment trust.
Results and dividend
The Company's revenue surplus after tax for the year amounted to £308,000 (30 June 2023: revenue surplus of £128,000). The Company made a capital surplus after tax of £96,345,000 (30 June 2023: capital surplus of £34,452,000). Therefore, the total surplus after tax for the Company was £96,653,000 (30 June 2023: surplus of £34,580,000).
The Board is proposing that no dividend be paid in respect of the year ended 30 June 2024 in accordance with the Company's Dividend policy as outlined in above paragraph.
Key performance indicators
The Board measures the Company's success in attaining its investment objective by reference to the following KPIs:
(i) Achievement of NAV and share price growth over the long term
The Board monitors both the NAV and share price performance and compares them with the MSCI India IMI (in sterling terms). A review of performance is undertaken at each quarterly Board meeting and the reasons for relative under and over performance against various comparators is discussed. The Company's NAV and share price total returns for the year to 30 June 2024 were 35.5% and 35.9% (30 June 2023: 18.3% and 19.4%) respectively compared to a total return of 37.7% (30 June 2023: 11.8%) for the MSCI India IMI (in sterling terms).
The Chairman's statement which can be found above incorporates a review of the highlights during the year. The Investment Manager's Report shown above highlights investments made during the year and how performance has been achieved.
(ii) Performance of premium or discount of share price to NAV that is comparable to its peers
Company's Broker monitors the premium or discount on an ongoing basis and keeps the Board updated as and when appropriate. At quarterly Board meetings the Board reviews the premium or discount in the period since the previous meeting in comparison with other investment trusts within the AIC India/Indian Subcontinent sector. The Company has a redemption facility through which Shareholders will be entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis. The Company's shares traded at a premium of 1.7% on 30 June 2024 (30 June 2023: premium of 1.4%).
(iii) Maintenance of a comparable level of ongoing charges (excluding performance fee)
The Board receives monthly management accounts which contain an analysis of expenditure, and these are formally reviewed at quarterly Board meetings. The Management Engagement Committee formally reviews the fees payable to the Company's main service providers on an annual basis. The Board reviews the ongoing charges on a quarterly basis and considers these to be reasonable in comparison to other investment trusts within the AIC India/Indian Subcontinent sector.
Based on the Company's average net assets during the year ended 30 June 2024, the Company's ongoing charges figure calculated in accordance with the AIC methodology was 0.5% (30 June 2023: 0.5%).
Risk and Risk Management
Principal and emerging risks and uncertainties
The following table provides a summary of the Board's assessment of the Company's principal risks as well as an explanation of how these are being managed or mitigated.
| Description | Mitigation |
| Economic and market conditions Changes in general economic and market conditions in India including, for example, interest rates, cost increase, rates of inflation, industry conditions, competition, political events and trends, tax laws, national and international conflicts and other factors could substantially and adversely affect the Company's prospects. Weak economic and market conditions in Europe and the US may lead to foreign disinvestment in Indian equities (the "flight to quality"). |
The Investment Adviser has a proven and extensive track record with a focus on good corporate governance and will monitor the position and report regularly to the Board on market developments. India is to a degree protected from global economic downdrafts and increases in world inflation as it is a relatively closed economy and not as vulnerable to high and rising energy prices as in the past. Whilst not immune from disrupted global trade, India may benefit from a change of supply lines from, in particular, China. In addition, India is not saddled with the debt problems of Europe and the US and the currency should therefore remain stable or appreciate against the currencies of its main trading partners. The Investment Adviser, together with the broker has an active and regular dialogue with Shareholders. |
| Sectoral diversification Concentration of investments in any one sector may result in greater volatility in the value of the Company's investments and consequently its NAV and may materially and adversely affect the performance of the Company and returns to Shareholders. |
The Company's investment policy states that no single holding will represent more than 15% of the Company's Gross Assets and no more than 40% of Gross Assets will be invested in any single sector (calculated at the time of investment). The investment policy allows a minimum of 50 investments to be held in the portfolio to assist with diversification. The Board measures the Company's performance for reference purposes against the MSCI India IMI (in sterling terms). The Board also monitors performance relative to the Company's peer group over a range of periods, taking into account the differing investment policies and objectives. |
| Corporate governance and internal control risks (including cyber security) The Board has contractually delegated to external agencies the management of the investment portfolio, the custodial services (which include the safeguarding of the assets), the registration services and the accounting and company secretarial services. The main risk areas arising from the above contracts relate to allocation of the Company's assets by the Investment Manager, and the performance of administrative company secretarial, registration and custodial services. These could lead to various consequences including the loss of the Company's assets, inadequate returns to Shareholders and loss of investment trust status. Cyber security risks could lead to breaches of confidentiality, loss of data records and the inability to make investment decisions. The growing use of artificial intelligence has increased the risk from cyber crime. |
Each of these contracts were entered into after full and proper consideration of the quality and cost of services offered, including the financial control systems in operation in so far as they relate to the affairs of the Company. All of the above services are subject to ongoing oversight of the Board and the performance of the principal service providers is reviewed on a regular basis. The Board monitors key personnel risks as part of its oversight of the Investment Manager. The Company's key service providers report periodically to the Board on their control procedures including those in respect of cyber security risks. |
| Regulatory risks Breaches of Section 1158 of the Corporation Tax Act could result in loss of investment trust status. Loss of investment trust status would lead to the Company being subject to tax on any gains on the disposal of its investments. Breaches of the Financial Conduct Authority ("FCA")'s rules applicable to listed entities could result in financial penalties or suspension of trading of the Company's shares on the London Stock Exchange ("LSE"). Breaches of the Companies Act 2006, The Financial Services and Markets Act, The Alternative Investment Fund Managers' Directive, Accounting Standards, The General Data Protection Regulation, The Listing Rules, Disclosure Guidance and Transparency Rules and Prospectus Rules could result in financial penalties or legal proceedings against the Company or its Directors. Failure of the Investment Manager to meet its regulatory obligations could have adverse consequences on the Company. |
The Company has contracted out relevant services to appropriately qualified professionals. The Investment Manager and the Company Secretary report on regulatory matters to the Board on a quarterly basis. The assessment of regulatory risks forms part of the Board's risk assessment programme. |
| Financial risks The Company's investment activities expose it to a variety of financial risks which include foreign currency risk and interest rate risk. |
The investment policy states that while the Company retains the flexibility to do so, it is expected in the normal course of business that currency exposure will not be hedged. The Company does not currently have any borrowings, therefore is not exposed to interest rate risk. The Company's financial risks are disclosed in note 15 to the financial statements. |
| Emerging Risks ESG and Climate Change The Company could suffer as a result of increased investor demand for products which promote ESG investments. Climate change and climate change policies may lead to additional costs and risks for portfolio companies. |
In making investment decisions, the Investment Manager considers qualitative measures, such as the environmental and social impact of a company as well as financial and operational measures. The Company's ESG Policy, found in the Company's full annual report, is updated annually and is published on the Company's website. The ESG Policy includes ESG factors that are considered in the investment process where they are relevant and have a material impact on stock performance. It also includes information regarding the proprietary rating framework developed by the Investment Adviser to assess companies on ESG metrics. The framework consists of a sector-specific hierarchy of key Environmental and Social factors, against which a sector company is assessed based on its practices and disclosures. The Investment Adviser prioritises dialogue with companies that have greater scope for improvement in disclosures and/or practices. |
| Extreme weather events could potentially impair the operations of individual investee companies, potential investee companies, their supply chains, and their customers. | The Investment Manager takes such risks into account, along with the downside risk to any company (whether in the form of its business prospects, market valuation or sustainability of dividends) that is perceived to be making a detrimental contribution to climate change. The Company invests in a broad portfolio of businesses with operations spread across India, which should limit the impact of location specific weather events. The Investment Manager also closely monitors the businesses which have a greater exposure to climate change related risks and their progress towards a low-carbon dioxide transition. |
| Potential reputational damage from non-compliance with regulations or incorrect disclosures. | The Board has adopted a policy of fostering high standards of corporate governance in all its activities. This principle is the cornerstone of creating and preserving long-term shareholder value. The Company Secretary and AIFM regularly report to the Board any changes in the regulatory environment. Whilst Investment trusts are currently exempt from the Task Force on Climate-Related Financial Disclosures ("TCFD"), White Oak Capital support the recommendations of TCFD and intend to continue to promote increased transparency, encourage the development of tools and methods to manage climate-related risks and opportunities and contribute to the best practices in the industry. |
| Impact of War/Sanctions The impact of Russia's invasion of Ukraine and the conflict in Gaza on the Company's portfolio of investments and any future prolonged and deep market decline which would likely lead to falling values in the Company's investments or interruptions to cash flow. The extent and impact of military action, resulting sanctions and further market disruptions is difficult to predict which increases uncertainty and challenges confidence in financial markets. This could lead to a recession if the conflict were to move towards a broader regional or global conflict. |
The Company does not have any direct or indirect exposure to investments in Ukraine, Russia, Israel or Palestine. There are also no direct business relationships with counterparties from these countries. |
GOING CONCERN
The Directors have adopted the going concern basis in preparing the accounts. The following is a summary of the Directors' assessment of the going concern status of the Company.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the period to 31 December 2025, which is at least twelve months from the date of this document. In reaching this conclusion, the Directors have considered the liquidity of the Company's portfolio of investments as well as its cash position, income and expense flows. The Company's net assets at 30 June 2024 were £435.4 million (30 June 2023: £232.6 million). As at 30 June 2024, the Company held £448.4 million (30 June 2023: £233.3 million) in quoted investments and cash of £5.7 million (30 June 2023: £6.5 million). The total expenses (excluding performance fees) for the year ended 30 June 2024 were £1.5 million (30 June 2023: £1.0 million), which represented approximately 0.5% (30 June 2023: 0.5%) of average net assets during the year. At the date of approval of these Financial Statements, based on the aggregate of investments and cash held, the Company has substantial operating expenses cover.
The Company has a redemption facility through which Shareholders, provided normal market conditions prevail, will be entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis allowing Shareholders to realise their investment. This annual redemption facility is subject to the final approval of the Board. On 6 September 2024, the Company announced that 358,340 valid redemption requests had been received for the 30 September 2024 Redemption Point (representing 0.2% of the issued share capital at that point).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable laws and regulations.
The Companies Act 2006 (the "company law") requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Company financial statements in accordance with UK-adopted international accounting standards.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company during and as at the end of the year. In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates, which are reasonable and prudent;
· present information including accounting policies and additional disclosures as required to ensure the report is presented in a manner that provides relevant, reliable, comparable and understandable information;
· state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
· prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The accounts are published on the Company's website at https://ashokaindiaequity.com, which is maintained by the Investment Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since being initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS' CONFIRMATION STATEMENT
The Directors each confirm to the best of their knowledge that:
(a) the financial statements, prepared in accordance with UK-adopted international accounting standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.1.12R; and
(b) this Annual Report comprising the Strategic Report and Governance Statements includes a fair review of the development and performance of the business and position of the Company, together with a description of the principal and emerging risks that it faces as required by DTR 4.1.8R and DTR 4.1.9R.
Having taken advice from the Audit Committee, the Directors consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy.
FOR AND ON BEHALF OF THE BOARD
ANDREW WATKINS
Chairman
16 October 2024
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
| For the year ended 30 June 2024 |
For the year ended 30 June 2023 |
||||||
| Note | Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Gains on investments | 4 | - | 114,999 | 114,999 | - | 43,805 | 43,805 |
| (Losses)/gains on currency movements | - | (3,405) | (3,405) | - | 330 | 330 | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net investment gains | - | 111,594 | 111,594 | - | 44,135 | 44,135 | |
| Income | 5 | 2,196 | - | 2,196 | 1,308 | - | 1,308 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total income | 2,196 | 111,594 | 113,790 | 1,308 | 44,135 | 45,443 | |
| Performance fees* | 7 | (139) | 302 | 163 | - | (2,464) | (2,464) |
| Operating expenses | 8 | (1,533) | - | (1,533) | (1,041) | - | (1,041) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Operating profit before taxation | 524 | 111,896 | 112,420 | 267 | 41,671 | 41,938 | |
| Taxation | 9 | (216) | (15,551) | (15,767) | (139) | (7,219) | (7,358) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Profit for the year | 308 | 96,345 | 96,653 | 128 | 34,452 | 34,580 | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Earnings per Ordinary Share | 10 | 0.25p | 76.99p | 77.24p | 0.14p | 38.51p | 38.65p |
| \========= | \========= | \========= | \========= | \========= | \========= |
* See Note 3(e) for basis of allocation
There is no other comprehensive income and therefore the 'Profit for the year' is the total comprehensive income for the year ended 30 June 2024.
The total column of the above statement is the profit and loss account of the Company. The supplementary revenue and capital columns, including the earnings per Ordinary Share, are prepared under guidance from the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
The notes below form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
| Note | 30 June 2024 £'000 |
30 June 2023 £'000 |
|
| Non-current assets | |||
| Investments held at fair value through profit or loss | 4 | 451,026 | 236,764 |
| --------------- | --------------- | ||
| Current assets | |||
| Cash and cash equivalents | 5,677 | 6,489 | |
| Dividend receivable | 307 | 229 | |
| Other receivables | 156 | 225 | |
| --------------- | --------------- | ||
| 6,140 | 6,943 | ||
| --------------- | --------------- | ||
| Total assets | 457,166 | 243,707 | |
| \========= | \========= | ||
| Current liabilities | |||
| Purchases for future settlement | (1,534) | (459) | |
| Other payables | 6 | (735) | (520) |
| Performance fee payable | 7 | (2,301) | (2,464) |
| Non-Current liabilities | |||
| Capital gains tax provision | (17,157) | (7,713) | |
| --------------- | --------------- | ||
| Total liabilities | (21,727) | (11,156) | |
| \========= | \========= | ||
| Net assets | 435,439 | 232,551 | |
| \========= | \========= | ||
| Equity | |||
| Share capital | 12 | 1,572 | 1,128 |
| Share premium account | 206,794 | 101,003 | |
| Special distributable reserve | 13 | 44,276 | 44,276 |
| Capital reserve | 182,481 | 86,136 | |
| Revenue reserve | 316 | 8 | |
| --------------- | --------------- | ||
| Total equity | 435,439 | 232,551 | |
| \========= | \========= | ||
| Net asset value per Ordinary Share | 14 | 279.3p | 206.2p |
| \========= | \========= |
Approved by the Board of Directors on 16 October 2024 and signed on its behalf by:
ANDREW WATKINS
Director
Ashoka India Equity Investment Trust plc incorporated in England and Wales with registered number 11356069.
The notes below form an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2024
| Notes | Share Capital £'000 |
Share premium account £'000 |
Special distributable reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
| Opening balance as at 1 July 2023 | 1,128 | 101,003 | 44,276 | 86,136 | 8 | 232,551 | |
| Profit for the year | - | - | - | 96,345 | 308 | 96,653 | |
| Issue of Ordinary Shares | 12 | 431 | 107,077 | - | - | - | 107,508 |
| Share issue costs | - | (1,286) | - | - | - | (1,286) | |
| Management Shares | 12 | 13 | - | - | - | - | 13 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Closing balance as at 30 June 2024 | 1,572 | 206,794 | 44,276 | 182,481 | 316 | 435,439 | |
| \========= | \========= | \========= | \========= | \========= | \========= |
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2023
| Notes | Share Capital £'000 |
Share premium account £'000 |
Special distributable reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
| Opening balance as at 1 July 2022 | 1,076 | 90,470 | 44,276 | 51,684 | (120) | 187,386 | |
| Profit for the year | - | - | - | 34,452 | 128 | 34,580 | |
| Issue of Ordinary Shares | 12 | 52 | 10,683 | - | - | - | 10,735 |
| Share issue costs | - | (150) | - | - | - | (150) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Closing balance as at 30 June 2023 | 1,128 | 101,003 | 44,276 | 86,136 | 8 | 232,551 | |
| \========= | \========= | \========= | \========= | \========= | \========= |
The Company's distributable reserves consist of the special distributable reserve, revenue reserve and capital reserve attributable to realised profit.
The notes below form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
| Note | For the year ended 30 June 2024 £'000 |
For the year ended 30 June 2023 £'000 |
|
| Cash flows from operating activities | |||
| Operating profit before taxation | 112,420 | 41,938 | |
| Taxation paid | (6,323) | (3,362) | |
| Increase in receivables | (9) | (224) | |
| Increase in payables | 52 | 2,781 | |
| Gains on investments | 4 | (114,999) | (43,805) |
| --------------- | --------------- | ||
| Net cash flow used in operating activities | (8,859) | (2,672) | |
| --------------- | --------------- | ||
| Cash flows from investing activities | |||
| Purchase of investments | (276,302) | (120,344) | |
| Sale of investments | 178,114 | 111,893 | |
| --------------- | --------------- | ||
| Net cash flow used in investing activities | (98,188) | (8,451) | |
| --------------- | --------------- | ||
| Cash flows from financing activities | |||
| Proceeds from issue of Ordinary Shares | 12 | 107,508 | 10,735 |
| Proceeds from Management Shares issued | 13 | - | |
| Share issue costs | (1,286) | (150) | |
| --------------- | --------------- | ||
| Net cash flow from financing activities | 106,235 | 10,585 | |
| --------------- | --------------- | ||
| Decrease in cash and cash equivalents | (812) | (538) | |
| --------------- | --------------- | ||
| Cash and cash equivalents at start of year | 6,489 | 7,027 | |
| --------------- | --------------- | ||
| Cash and cash equivalents at end of year | 5,677 | 6,489 | |
| \========= | \========= |
The notes below form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. REPORTING ENTITY
Ashoka India Equity Investment Trust plc is a closed-ended investment company, registered in England and Wales on 11 May 2018. The Company's registered office is 6th Floor 125 London Wall, London, England, EC2Y 5AS. Business operations commenced on 6 July 2018 when the Company's Ordinary Shares were admitted to trading on the LSE. The financial statements of the Company are presented for the year from 1 July 2023 to 30 June 2024.
The Company primarily invests in securities listed on any stock exchange in India and can invest in the securities of companies with a significant presence in India that are listed on stock exchanges outside India.
2. BASIS OF PREPARATION
Statement of compliance
These financial statements have been prepared in accordance with applicable law and the UK-adopted international accounting standards. The financial statements have been prepared on a historical cost basis, except for the measurement at fair value of investments.
When presentational guidance set out in the Statement of Recommended Practice ("SORP") for Investment Companies issued by the Association of Investment Companies ("the AIC") in July 2022 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
In preparing these Financial Statements the Directors have considered the impact of climate change risk as a Principal and emerging risk as set above. In line with the UK-adopted international accounting standards, investments are valued at fair value, being primarily quoted prices for investments in active markets at the balance sheet date, and therefore reflect market participant's view of climate change risk. Unlisted investments, valued by reference to appropriate valuation techniques (see note 3), similarly reflect market participants' view of climate change risk.
Going concern
The Directors have concluded that there is a reasonable expectation that the Company will have adequate liquidity and cash balances to meet its liabilities as they fall due and continue in operational existence for the foreseeable future and continue as a going concern for the period to 31 December 2025. As such the Directors have adopted the going concern basis in preparing the financial statements.
The Company has a redemption facility through which Shareholders, provided normal market conditions prevail, will be entitled to request the redemption of all or part of their holding of Ordinary Shares on an annual basis allowing Shareholders to realise their investment. This annual redemption facility is subject to the final approval of the Board. On 6 September 2024, the Company announced that 358,340 valid redemption requests had been received for the 30 September 2024 Redemption Point (representing 0.2% of the issued share capital at that point).
Use of estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The Indian capital gains tax provision represents an estimate of the amount of tax payable by the Company. Tax amounts payable may differ from this provision depending on when the Company disposes of investments. The current provision for Indian capital gains tax is calculated based on the long-term or short-term nature of the investments and the applicable tax rate at the year end. Currently, the short-term tax rate is 15% and the long-term tax rate is 10%. The estimated tax charge is subject to regular review including a consideration of the likely period of ownership, tax rates and market valuation movements.
As disclosed in the statement of financial position, the Company made a capital gains tax provision as at 30 June 2024 of £17,157,000 (30 June 2023: £7,713,000) in respect of unrealised gains on investments held.
The Company's investments are denominated in Indian rupees. However, the Company's shares are issued in sterling and the majority of its investors are UK based. The Company's expenses and dividends are also paid in sterling. Therefore, the financial statements are presented in sterling, which is the Company's functional currency. All financial information has been rounded to the nearest thousand pounds.
The key estimate in the financial statements is the determination of the fair value of the unlisted investments by the Investment Manager for consideration by the Directors. This estimate is key as it significantly impacts the valuation of the unlisted investments at the year end. The fair valuation process involves estimation using subjective inputs that are unobservable (for which market data is unavailable). The key inputs considered in the valuation are described below.
Fair value estimates are cross-checked to alternative estimation methods where possible to improve the robustness of the estimates. The risk of an over or under estimation of fair values is greater when methodologies are applied using more subjective inputs.
Basis of measurement
The financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss, which are measured at fair value.
3. ACCOUNTING POLICIES
(a) Investments
Listed investments
Changes in the fair value of investments held at fair value through profit or loss and gains or losses on disposal are included in the capital column of the Statement of Comprehensive Income within "gains on investments".
Investments are derecognised on the trade date of their disposal, which is the point where the Company transfers substantially all the risks and rewards of the ownership of the financial asset.
Transaction costs directly attributable to the acquisition of investments at fair value through profit or loss are recognised under gains/(losses) on investments.
Unlisted investments
The Investment Manager unlisted investment valuation policy applies techniques consistent with the IPEV Guidelines.
The techniques applied are predominantly market-based approaches or discounted cash flows where appropriate forecasts can be done. The market-based approaches available under IPEV Guidelines are set out below and are followed by an explanation of how they are applied to the Company's unlisted portfolio:
- Multiples; and
- Industry Valuation Benchmarks.
The nature of the unlisted portfolio currently will influence the valuation technique applied. The valuation approach recognises that, as stated in the IPEV Guidelines, the price of a recent investment, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the facts and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee company. Milestone analysis is used where appropriate to incorporate the operational progress of the investee company into the valuation. Additionally, the background to the transaction must be considered. As a result, various Multiples-based techniques are employed to assess the valuations particularly in those companies with established revenues. Discounted cash flows are used where appropriate. An absence of relevant industry peers may preclude the application of the industry valuation benchmarks technique. All valuations are cross-checked for reasonableness by employing relevant alternative techniques.
(b) Foreign currency
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At the date of each Statement of Financial Position, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the Statement of Comprehensive Income within the revenue or capital column depending on the nature of the underlying item. Foreign exchange movements on investments are included in the Statement of Comprehensive Income within "(losses)/gains on currency movements".
(c) Income from investments
Dividend income from shares is accounted for on the basis of ex-dividend dates. Overseas income is grossed up at the appropriate rate of tax.
Special dividends are assessed on their individual merits and may be credited to the Statement of Comprehensive Income as a capital item if considered to be closely linked to reconstructions of the investee company or other capital transactions. All other investment income is credited to the Statement of Comprehensive Income as a revenue item.
Interest on fixed income instruments is accounted on an accrual basis.
(d) Capital reserves
Profits or losses arising on the sale of investments and changes in fair value arising upon the revaluation of investments are credited or charged to the capital column of the Statement of Comprehensive Income and allocated to the capital reserve.
Company's redemption facility is subject to approval by the Board and as such the redemption facility does not represent a contractual obligation on the Company and the shares are accordingly classified as equity.
(e) Expenses
All expenses are accounted for on an accrual basis. Expenses are recognised through the Statement of Comprehensive Income as revenue items. For the year ended 30 June 2024, performance fees payable are allocated in accordance with the AIC guidance where that part of the Performance fee directly attributable to the revenue performance of the Company is allocated to revenue and shown in the revenue column of the Statement of Comprehensive Income, and the part that is directly attributable to the capital performance of the Company's investments is allocated to capital and shown in the capital column of the Statement of Comprehensive Income. In prior years, performance fees, if any, were payable directly by reference to the capital performance of the Company as per the Investment Management Agreement and were therefore charged to the Statement of Comprehensive Income as a capital item. This change in performance fee recognition has been applied prospectively.
No other management fees are payable by the Company.
(f) Cash and cash equivalents
Cash comprises cash at hand and demand deposits. For purposes of the statement of cash flows, cash equivalents, including bank overdrafts, are short-term, highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
(g) Taxation
Irrecoverable taxation on dividends is recognised on an accrual's basis in the Statement of Comprehensive Income. Indian tax rates for dividends with ex-dividend dates post 1 April 2020 are subject to 20% withholding tax.
The tax charges on Indian capital gains taxes are shown in the Statement of Comprehensive Income, recognised on an accrual basis. The Company is not subject to UK capital gains tax.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.
(h) Adoption of new IFRS standards
A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning on or after 1 January 2023. None of these have a material impact on the measurement of the amounts recognised in the financial statements of the Company.
(i) New standards and amendments issued but not yet effective
The relevant new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company's financial statements are disclosed below. These standards are not expected to have a material impact on the entity in future reporting periods and on foreseeable future transactions.
Amendments to IAS 1: Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants
In January 2020 and October 2022, the IASB issued amendments to IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2024.
Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback
In September 2022, the Board issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16). The amendment to IFRS 16 Leases specifies the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss that relates to the right of use it retains. The amendments are effective for annual reporting periods beginning on or after 1 January 2024.
Amendments to IAS 7 and IFRS 7 - Disclosures: Supplier Finance Arrangements
In May 2023, the Board issued amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures. The amendments specify disclosure requirements to enhance the current requirements, which are intended to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity's liabilities, cash flows and exposure to liquidity risk. The amendments are effective for annual reporting periods beginning on or after 1 January 2024.
IFRS 18 Presentation and Disclosure in Financial Statements
In April 2024, the IASB published IFRS 18, including new requirements for presentation and disclosure in the financial statements, with a focus on the income statement. IFRS 18 will be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.
IFRS 19 Subsidiaries without Public Accountability: Disclosures
In May 2024, the IASB published IFRS 19, a voluntary IFRS Accounting Standard for use by eligible subsidiaries that prepare financial statements applying IFRS Accounting Standards. IFRS 19 will be effective for annual reporting periods beginning on or after 1 January 2027, with earlier application permitted.
Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and Measurement of Financial Instruments
In May 2024, the IASB published Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and Measurement of Financial Instruments. The Amendments will be effective for annual reporting periods beginning on or after 1 January 2026, with earlier application permitted.
4. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Investments held at fair value through profit or loss
| As at 30 June 2024 £'000 |
As at 30 June 2023 £'000 |
|
| Quoted investments in India | 448,412 | 233,303 |
| Unquoted investments in India | 2,614 | 3,461 |
| --------------- | --------------- | |
| Closing valuation | 451,026 | 236,764 |
| \========= | \========= |
(b) Movements in valuation
| As at 30 June 2024 £'000 |
As at 30 June 2023 £'000 |
|
| Opening valuation | 236,764 | 183,361 |
| Opening unrealised gains on investments | 56,724 | 29,059 |
| --------------- | --------------- | |
| Opening book cost | 180,040 | 154,302 |
| Additions, at cost | 276,533 | 120,803 |
| Disposals, at cost | (126,681) | (95,065) |
| --------------- | --------------- | |
| Closing book cost | 329,892 | 180,040 |
| Revaluation of investments | 121,134 | 56,724 |
| --------------- | --------------- | |
| Closing valuation | 451,026 | 236,764 |
| \========= | \========= |
Transaction costs on investment purchases for the year ended 30 June 2024 amounted to £520,000 (30 June 2023: £163,000) and on investment sales for the financial year to 30 June 2024 amounted to £347,000 (30 June 2023: £181,000). As at year end £27.2 million (30 June 2023: £2.3 million) of investments were subject to lock in periods.
(c) Gains on investments
| Year ended 30 June 2024 £'000 |
Year ended 30 June 2023 £'000 |
|
| Realised gains on disposal of investments | 51,433 | 16,484 |
| Transaction costs | (867) | (344) |
| Movement in unrealised gains on investments held | 64,410 | 27,665 |
| Movement in unrealised gains on futures held | 23 | - |
| --------------- | --------------- | |
| Total gains on investments | 114,999 | 43,805 |
| \========= | \========= |
Under IFRS 13 'Fair Value Measurement', an entity is required to classify investments using a fair value hierarchy that reflects the significance of the inputs used in making the measurement decision.
The following shows the analysis of financial assets recognised at fair value based on:
Level 1
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3
Unobservable inputs for the asset or liability.
The classification of the Company's investments held at fair value is detailed in the table below.
| As at 30 June 2024 | As at 30 June 2023 | |||||||
| Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
Level 1 £'000 |
Level 2 £'000 |
Level 3 £'000 |
Total £'000 |
|
| Investments at fair value through profit and loss | ||||||||
| - Quoted investments in India | 448,412 | - | - | 448,412 | 233,303 | - | - | 233,303 |
| - Unquoted investments in India | - | - | 2,614 | 2,614 | - | - | 3,461 | 3,461 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| 448,412 | - | 2,614 | 451,026 | 233,303 | - | 3,461 | 236,764 | |
| \========= | \========= | \========= | \========= | \========= | \========= | \========= | \========= |
The movement on the Level 3 unquoted investments during the period is shown below:
| As at 30 June 2024 £'000 |
As at 30 June 2023 £'000 |
|
| Opening balance | 3,461 | 5,363 |
| Additions during the year | - | 1,199 |
| Disposals during the year | (1,569) | - |
| Conversion from level 3 to level 1 investments | - | (2,916) |
| Total losses for the year recognised in profit or loss | 722 | (185) |
| --------------- | --------------- | |
| Closing balance | 2,614 | 3,461 |
| \========= | \========= |
As at year end, the Company had one unquoted investment in Veeda Clinical Research Ltd for a total of 680,790 shares.
Since the end of the prior year, the investment in Ideaforge Technology Ltd was sold.
Unquoted investments are valued by the Investment Manager in accordance with the International Private Equity and Venture Capital Valuation Guidelines 2022 ("IPEV") guidelines which are consistent with IFRS. On 14 December 2022, the IPEV Board published revised International Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines" or "Valuation Guidelines" or "Guidelines"), effective for periods beginning from 1 January 2023. The key inputs considered in the valuation are described below.
Financial assets and liabilities are held at fair value in the financial statements with the exception of short-term assets and liabilities where their carrying value approximates to fair value.
5. INCOME
| Year ended 30 June 2024 £'000 |
Year ended 30 June 2023 £'000 |
|
| Income from investments: | ||
| Overseas dividends | 2,190 | 1,307 |
| Other income: | ||
| Bank interest Income | 6 | 1 |
| --------------- | --------------- | |
| Total income | 2,196 | 1,308 |
| \========= | \========= |
6. OTHER PAYABLES
| As at 30 June 2024 £'000 |
As at 30 June 2023 £'000 |
|
| Accrued expenses | 735 | 520 |
| --------------- | --------------- | |
| Total other payables | 735 | 520 |
| \========= | \========= |
7. PERFORMANCE FEES PROVISION
| Year ended 30 June 2024 | Year ended 30 June 2023 | |||||
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Performance fees expenses | 139 | (302) | (163) | - | 2,464 | 2,464 |
| \========= | \========= | \========= | \========= | \========= | \========= |
The Investment Manager does not receive a fixed management fee in respect of its portfolio management services to the Company. The Investment Manager will become entitled to a performance fee subject to the Company delivering excess returns versus the MSCI India IMI (in sterling terms) in the medium term. The performance fee will be measured over periods of three years (Performance Period), with this Performance Period ending on 30 June 2024. The performance fee in any Performance Period shall be capped at 12% of the time weighted average adjusted net assets during the relevant Performance Period.
The performance fee is calculated at a rate of 30% of the excess returns between adjusted NAV per share on the last day of the performance period and the MSCI India IMI (in sterling terms) over the performance period, adjusted for the weighted average number of Ordinary Shares in issue during the performance period. The Performance Fee in respect of each Performance Period will be paid at the end of the three-year period.
As at 30 June 2024, there was a £2,301,000 provision for the performance fee liability to the Investment Manager for the full three-year period (30 June 2023: £2,464,000, for the two-year period).
8. EXPENSES
| Year ended 30 June 2024 £'000 |
Year ended 30 June 2023 £'000 |
|
| Administration & secretarial fees | 232 | 197 |
| Auditor's remuneration - Statutory audit fee* | 60 | 67 |
| Broker fees | 40 | 32 |
| Custody services | 48 | 40 |
| Directors' fees | 128 | 128 |
| Board meeting in India and other meeting expenses | 16 | 31 |
| Tax compliance and advice | 119 | 30 |
| Printing and public relations | 178 | 128 |
| Registrar fees | 37 | 24 |
| Research and marketing fees | 88 | 84 |
| Legal Fees | 133 | 92 |
| Retail advertising and promotion fees | 215 | 74 |
| Regulatory fees | 18 | 16 |
| Other expenses** | 221 | 98 |
| --------------- | --------------- | |
| Total | 1,533 | 1,041 |
| \========= | \========= |
* Auditor's remuneration excludes VAT.
** Other expenses include LSE, KID fees, Distribution fees, other license fees, bank charges and other miscellaneous fees.
9. TAXATION
(a) Analysis of charge in the year:
| Year ended 30 June 2024 | Year ended 30 June 2023 | |||||
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Capital gains tax provision | - | 9,444 | 9,444 | - | 4,684 | 4,684 |
| Capital gains expense | - | 6,107 | 6,107 | - | 2,535 | 2,535 |
| Indian withholding tax | 216 | - | 216 | 139 | - | 139 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total tax charge for the year | 216 | 15,551 | 15,767 | 139 | 7,219 | 7,358 |
| \========= | \========= | \========= | \========= | \========= | \========= |
The Company is liable to Indian capital gains tax under Section 115 AD of the Indian Income Tax Act 1961. A tax provision on Indian capital gains is calculated based on the long-term (securities held more than one year) or short-term (securities held less than one year) nature of the investments and the applicable tax rate at the period end. The short-term tax rates are 15% and the long-term tax rates are 10%.
The Company's dividends are received net of 20% withholding tax. Of this 20% withholding tax charge, 10% is irrecoverable with the remainder being shown in the Statement of Financial Position as an asset due for reclaim.
(b) Factors affecting the tax charge for the year:
The effective UK corporation tax rate for the year is 25% (2023: 20.5%). The tax charge differs from the charge resulting from applying the standard rate of UK corporation tax for an investment trust company. The differences are explained below:
| Year ended 30 June 2024 £'000 |
Year ended 30 June 2023 £'000 |
|
| Operating profit before taxation | 112,420 | 41,938 |
| UK Corporation tax at 25% (2023: 20.5%) | 28,105 | 8,597 |
| Effects of: | ||
| Indian capital gains tax provision | 15,551 | 7,219 |
| Gains on investments not taxable | (27,899) | (9,048) |
| Overseas dividends not taxable | (548) | (268) |
| Other income not taxable | (2) | |
| Unutilised management expenses | 344 | 719 |
| Indian withholding tax | 216 | 139 |
| --------------- | --------------- | |
| Total tax charge for the year | 15,767 | 7,358 |
| \========= | \========= |
The Company is not liable to UK Corporation tax on capital gains due to its status as an investment trust. The Company has an unrecognised deferred UK Corporation tax asset of £3,806,000 (2023: £3,465,000) based on the prospective UK corporation tax rate of 25% (2023: 25%). This asset has accumulated because deductible expenses exceeded taxable income for the year ended 30 June 2024. No asset has been recognised in the accounts because, given the composition of the Company's portfolio, it is unlikely that this asset will be utilised in the foreseeable future.
With effect from 23 July 2024, the Company has applied the new tax rates, in accordance with the new Indian Government proposed Finance (No. 2) Bill, 2024 as follows;
Short-Term Capital Gains - increase from 15% to 20%. These changes have no impact on the capital gains tax calculation for the year ended 30 June 2024.
Long-Term Capital Gains - Increase from 10% to 12.5%. These changes have no impact on the capital gains tax calculation for the year ended 30 June 2024.
(c) Movements on the capital gains tax provision for the year
The capital gains tax provision represents an estimate of the amount of tax provisionally payable by the Company on direct investment in Indian equities. It is calculated based on the long-term or short-term nature of the investments and the unrealised gain thereon at the applicable tax rate at the year end. As of 30 June 2024, the Company made a capital gains tax provision of £17,157,000 (30 June 2023: £7,713,000) in respect of unrealised gains on investments held.
10. EARNINGS PER ORDINARY SHARE
| As at 30 June 2024 | As at 30 June 2023 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Profit for the year (£'000) | 308 | 96,345 | 96,653 | 128 | 34,452 | 34,580 |
| Earnings per Ordinary Share | 0.25p | 76.99p | 77.24p | 0.14p | 38.51p | 38.65p |
| \========= | \========= | \========= | \========= | \========= | \========= |
Earnings per Ordinary Share is based on the profit for the year of £96,653,000 (30 June 2023: £34,580,000) attributable to the weighted average number of Ordinary Shares in issue during the six months ended 30 June 2024 of 125,146,964 (30 June 2023: 89,469,919). Revenue and capital profits are £308,000 (30 June 2023: £128,000) and 96,345,000 (30 June 2023: £34,452,000) respectively.
11. DIVIDEND
The Company's objective is to provide shareholder returns through capital growth with income being a secondary consideration. It should not be expected that the Company will pay a significant annual dividend, but the Board intends to declare such annual dividends as are necessary to maintain the Company's UK investment trust status. The Board is proposing that no dividend be paid in respect of the year ended 30 June 2024 in accordance with the Company's Dividend policy shown above.
12. SHARE CAPITAL
| As at 30 June 2024 | As at 30 June 2023 | |||
| No. of shares | £'000 | No. of shares | £'000 | |
| Allotted, issued and fully paid: | ||||
| Redeemable Ordinary Shares of 1p each ('Ordinary Shares') | 155,892,397 | 1,559 | 112,807,812 | 1,128 |
| ---------------- | ---------------- | ---------------- | ---------------- | |
| Non-Redeemable Shares of £1.00 each ('Management Shares') | 50,000 | 13 | - | - |
| ---------------- | ---------------- | ---------------- | ---------------- | |
| Total | 155,942,397 | 1,572 | 112,807,812 | 1,128 |
| \========== | \========== | \========== | \========== |
Ordinary Shares
On incorporation, the issued share capital of the Company was 1 Ordinary Share of £0.01.
During the year ended 30 June 2024, 43,084,585 Ordinary Shares (30 June 2023: 5,240,1402) were issued with aggregate proceeds of £107,508,000 (30 June 2023: £10,735,000). As at the date of this Annual Report, the total number of Ordinary Shares in issue is 155,892,397 (30 June 2023: 112,807,812).
The Ordinary Shares have attached to them full voting, dividend and capital distribution rights. They confer rights of redemption. The Company's special distributable reserve may also be used for share repurchases, both into treasury or for cancellation.
Management shares
In addition to the above, on incorporation the Company issued 50,000 Management Shares of nominal value of £1.00 each.
The holder of the Management Shares undertook to pay or procure payment of one quarter of the nominal value of each Management share on or before the fifth anniversary of the date of issue of the Management Shares. The Management Shares are held by an associate of the Investment Manager.
The Management Shares do not carry a right to attend or vote at general meetings of the Company unless no other shares are in issue at that time. The Management Shares have been treated as equity in accordance with IFRS.
13. SPECIAL DISTRIBUTABLE RESERVE
As indicated in the Company's prospectus dated 19 June 2018, following admission of the Company's Ordinary Shares to trading on the LSE, the Directors applied to the Court and obtained a judgement on 4 December 2018 to cancel the amount standing to the credit of the share premium account of the Company. The amount of the share premium account cancelled and credited to a special distributable reserve was £44,275,898. This reserve may also be used to fund dividend/distribution payments.
14. NET ASSET VALUE ("NAV") PER ORDINARY SHARE
Net assets per ordinary share as at 30 June 2024 of £279.3p (30 June 2023: £206.2p) is calculated based on £435,439,000 (30 June 2023: £232,551,000) of net assets of the Company attributable to the 155,892,397 (30 June 2023: 112,807,812) Ordinary Shares in issue as at 30 June 2024.
15. FINANCIAL INSTRUMENTS AND CAPITAL DISCLOSURES
(i) Market risks
The Company is subject to a number of market risks in relation to economic conditions in India. Further detail on these risks and the management of these risks are included above under Principal Risks.
The Company's financial assets and liabilities comprised:
| As at 30 June 2024 | As at 30 June 2023 | |||||
| Interest bearing £'000 |
Non-interest bearing £'000 |
Total £'000 |
Interest bearing £'000 |
Non-interest bearing £'000 |
Total £'000 |
|
| Investments | - | 451,026 | 451,026 | - | 236,764 | 236,764 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total investment | - | 451,026 | 451,026 | - | 236,764 | 236,764 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Cash and cash equivalent | 1,032 | 4,645 | 5,677 | - | 6,489 | 6,489 |
| Short-term debtors | - | 463 | 463 | - | 454 | 454 |
| Short-term creditors | - | (4,570) | (4,570) | - | (3,443) | (3,443) |
| Long-term creditors | - | (17,157) | (17,157) | - | (7,713) | (7,713) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Other net assets | 1,032 | (16,619) | (15,587) | 6,489 | (10,702) | (4,213) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total financial assets and liabilities | 1,032 | 434,407 | 435,439 | 6,489 | 226,062 | 232,551 |
| \========= | \========= | \========= | \========= | \========= | \========= |
Market price risk sensitivity
The effect on the portfolio of a 10.0% increase or decrease in market prices would have resulted in an increase or decrease of £45,102,000 (30 June 2023: £23,676,000) in the investments held at fair value through profit or loss at the year end date, which is equivalent to 10.40% (30 June 2023: 10.20%) in the net assets attributable to equity holders. This analysis assumes that all other variables remain constant.
The Company's portfolio of unlisted level 3 investments is not necessarily affected by market performance, however the valuations may be affected by the performance of the underlying securities in line with the valuation criteria in the table below.
The unlisted securities sensitivity analysis recognises that the valuation methodologies employed involve different levels of subjectivity in their inputs. The valuations as at 30 June 2024 were primarily driven by the weighted average of Discounted Cash Flow (DCF) valuation, Market movement based valuation based on Index and Peer Group.
A. Veeda Clinical Research
| Valuation Techniques used in Financial Statements |
Fair £000 |
Key input |
Variable input | Positive impact £000 |
Negative impact £000 |
| Average of 1) Discounted Cash Flow 2) Market Movement based on Index and 2) Market movement of peers | 2,614 | For purposes of the sensitivity table it has been determined that discounted cash flow is the appropriate method to illustrate a sensitivity for. The index and market movements would result in a 10% increase / decrease whereas a 10% change in discount rate requires calculation. The positive impact and negative impact exhibit the impact of using only a discounted cash flow method to value the asset. | Discount rate used in Discounted cash flow | +164 | -107 |
Key variable inputs
The variable inputs applicable to each broad category of valuation basis will vary dependent on the particular circumstances of each unlisted company valuation. An explanation of each of the key variable inputs is provided below and includes an indication of the range in value for each input, where relevant.
Expected future cash flows and equity discount rate/WACC
The expected future cash flows are calculated using the aggregate future operating revenue based on growth in existing and new products resulting from the investment's ongoing capex and expansion plans. Equity discount rate/WACC is calculated at 16.7% (2023: 14.2%).
Selection of Index used
The selection of index is assessed based on the market comparable index to the Company. MSCI India IMI (in sterling terms) and S&P BSE 500 were the indices used as the basis for the market movement-based valuation.
Selection of comparable companies
The selection of comparable companies is assessed individually for each investment at the point of investment, and the relevance of the comparable companies is continually evaluated at each valuation. The key criteria used in selecting appropriate comparable companies are the industry sector in which they operate and the geography of the company's operations.
Application of valuation basis
Each investment is assessed and the valuation basis applied will vary depending on the circumstances of each investment. For those investments where a trading multiples approach can be taken, the methodology will factor in revenue, earnings or net assets as appropriate for the investment. Discounted cash flows will be considered where appropriate forecasts are available. The valuation will also consider any recent transactions, where appropriate.
Estimated sustainable earnings and cash flows
The selection of sustainable revenue or earnings and cash flows will depend on whether the company is sustainably profitable or not, and where it is not then sustainable revenues will be used in the valuation. The valuation approach will typically assess companies based on the last twelve months of revenue or earnings, as they are the most recent available and therefore viewed as the most reliable. Where a company has reliably forecasted earnings previously or there is a change in circumstance at the business which will impact earnings going forward, then forward estimated revenue or earnings may be used instead.
Application of liquidity discount
A liquidity discount may be applied either through the calibration of a valuation against the most recent transaction, or by application of a specific discount.
(ii) Liquidity risks
Liquidity risk is that the Company will not be able to meet its obligations when due. An analysis of the Company's portfolio that could be liquidated over different time periods as at the year end is shown below:
| 30 June 2024 % |
30 June 2023 % |
|
| Within one to seven days | 87.3 | 83.9 |
| Between seven days to one month | 8.3 | 11.2 |
| Between one and three months | 1.3 | 1.6 |
| Greater than three months | 3.1 | 3.3 |
| --------------- | --------------- | |
| Total | 100.0 | 100.0 |
| \========= | \========= |
Management of liquidity risks
The Company has a diversified portfolio which is readily realisable. The liquidity of the portfolio is reviewed regularly by the Investment Manager and the Board.
(iii) Currency risks
Although the Company's performance is measured in sterling, a high proportion of the Company's assets are denominated in Indian rupees. Change in the exchange rate between sterling and Indian rupees may lead to a depreciation of the value of the Company's assets as expressed in sterling and may reduce the returns to the Company from its investments.
Currency sensitivity
The below table shows the foreign currency profile of the Company.
Foreign currency risk profile
| As at 30 June 2024 | As at 30 June 2023 | |||||
| Investment exposure |
Net monetary exposure |
Total currency exposure |
Investment exposure |
Net monetary exposure |
Total currency exposure |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Indian Rupees | 434,256 | 2,413 | 436,669 | 230,513 | 5,377 | 235,890 |
| Swedish Krona | - | - | - | 561 | - | 561 |
| US Dollar | 16,770 | 1,154 | 17,924 | 5,690 | 347 | 6,037 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total investment | 451,026 | 3,567 | 454,593 | 236,764 | 5,724 | 242,488 |
| \========= | \========= | \========= | \========= | \========= | \========= |
Based on the financial assets and liabilities at 30 June 2024, and with all other variables remaining constant, if sterling had weakened/strengthened against the Indian rupee by 10%, the impact on the Company's net assets at 30 June 2024 would have been an increase/(decrease) in fair value as follows:
| 30 June 2024 | 30 June 2023 | |||
| Increase in Fair Value £'000 |
Decrease in Fair Value £'000 |
Increase in Fair Value £'000 |
Decrease in Fair Value £'000 |
|
| Indian Rupees | 43,426 | (43,426) | 23,051 | (23,051) |
| Swedish Krona | - | - | 56 | (56) |
| US Dollar | 1,677 | (1,677) | 569 | (569) |
| \========= | \========= | \========= | \========= |
Management of currency risks
The Company's Investment Manager monitors the currency risk of the Company's portfolio on a regular basis. Foreign currency exposure is regularly reported to the Board by the Investment Manager.
The Board does not intend to use hedge currency risk using any sort of foreign currency transactions, forward transactions or derivative instruments.
(iv) Credit risks
Credit risk is the risk that the issuer of a financial instrument will fail to fulfil an obligation or commitment that it has entered into with the Company.
Cash and other assets are held by the custodian.
Management of credit risks
The Company has appointed Kotak Mahindra Bank Limited ("Kotak") as its depositary. The credit rating of Kotak was reviewed at the time of appointment and is reviewed on a regular basis by the Investment Manager and the Board.
The Investment Manager monitors the Company's exposure to its counterparties on a regular basis and trades in equities are performed on a delivery versus payment basis. Impairment assessment based on an expected credit loss model is not considered material to
the Company.
At 30 June 2024, the Depositary held £451,026,000 (30 June 2023: £236,764,000) in respect of quoted and unquoted investments and £5,677,000 (30 June 2023: £6,489,000) in respect of cash on behalf of the Company.
(v) Capital management policies and procedures
The Company considers its capital to consist of its share capital of Ordinary Shares of 1p each, Management Shares of £1 each, and reserves totalling £435,439,000 (30 June 2023: £232,551,000).
The Company is not subject to any externally imposed capital requirements.
The Investment Manager and the Company's Broker monitor the demand for the Company's shares and the Directors review the position at Board meetings.
16. RELATED PARTY TRANSACTIONS
Performance fees payable to the Investment Manager are disclosed in Note 7.
White Oak Capital Partners provides investment advisory services to the Investment Manager and no fees are paid to them from the Company.
From 1 July 2021 fees were payable at an annual rate of £40,000 to the Chairman, £32,500 to the Chair of the Audit Committee, and £27,500 to the other Directors. From 1 July 2024 fees will be payable at an annual rate of £48,000 to the Chairman, £40,000 to the Chair of the Audit Committee, and £32,000 to the other Directors.
The Directors had the following shareholdings in the Company, all of which are beneficially owned.
| As at 30 June 2024 |
As at 30 June 2023 |
|
| Andrew Watkins | 94,425 | 94,425 |
| Jamie Skinner | 100,933 | 94,200 |
| Rita Dhut | 81,733 | 81,733 |
| Dr Jerome Booth | 85,522 | 77,623 |
| \========= | \========= |
17. POST BALANCE SHEET EVENTS
As announced on 6 September 2024, the total number of Ordinary Shares in respect of redemption requests were received for this Redemption Point was 358,340. All of which were immediately placed with buyers by the Company's corporate broker. The NAV per share of the Company has increased by 3.8% from 30 June 2024 to 14 October 2024.
With effect from 23 July 2024, the Company has applied the new tax rates, in accordance with the new Indian government proposed Finance (No. 2) Bill, 2024 as follows:
Short-Term Capital Gains - increase from 15% to 20%;
Long-Term Capital Gains - Increase from 10% to 12.5%. These changes have no impact on the capital gains tax calculation for the year ended 30 June 2024.
OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES
ORDINARY SHARE PRICE TO NAV PREMIUM
The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per Ordinary Share.
| As at 30 June 2024 |
As at 30 June 2023 |
||
| NAV per Ordinary Share (pence) | a | 279.3 | 206.2 |
| Share price (pence) | b | 284.0 | 209.0 |
| --------------- | --------------- | --------------- | |
| Premium | (b÷a)-1 | 1.7% | 1.4% |
| \========= | \========= | \========= |
ONGOING CHARGES
A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.
| Year ended 30 June 2024 |
Year ended 30 June 2023 |
||
| Average NAV | a | 306,836,778 | 215,928,920 |
| Annualised expenses* | b | 1,533,000 | 1,041,000 |
| ----------------- | ----------------- | ----------------- | |
| Ongoing charges | (b÷a)-1 | 0.5% | 0.5% |
| \========== | \========== | \========== |
* Annualised expenses exclude performance fees expense.
SHARE PRICE/NAV TOTAL RETURN
A measure of performance that includes both income and capital returns.
| Year ended 30 June 2024 | Share price | NAV | |
| Opening at 1 July 2023 (p) | a | 209.0 | 206.2 |
| Closing at 30 June 2024 (p) | b | 284.0 | 279.3 |
| --------------- | --------------- | --------------- | |
| Total return | (b÷a)-1 | 35.9% | 35.5% |
| \========= | \========= | \========= |
| Year ended 30 June 2023 | Share price | NAV | |
| Opening at 1 July 2022 (p) | a | 175.0 | 174.2 |
| Closing at 30 June 2023 (p) | b | 209.0 | 206.2 |
| --------------- | --------------- | --------------- | |
| Total return | (b÷a)-1 | 19.4% | 18.3% |
| \========= | \========= | \========= |
Financial information
This announcement does not constitute the Company's statutory accounts. The financial information is derived from the statutory accounts, which will be delivered to the registrar of companies and will be put forward for approval at the Company's Annual General Meeting. The auditors have reported on the accounts for the year ended 30 June 2024, their report was unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.
The Annual Report for the year ended 30 June 2024 was approved on 16 October 2024. The report will be available in electronic format on the Company's website, www.ashokaindiaequity.com .
The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated information under the Disclosure Guidance and Transparency Rules of the FCA.
Annual General Meeting
The Annual General Meeting will be held at the offices of White Oak at 13 Hanover Square, Mayfair, London W1S 1HN on 10 December 2024 at 10.45am.
Company Secretary and registered office:
Apex Listed Companies Services (UK) Limited
6th Floor, 125 London Wall, Barbican, London EC2Y 5AS, United Kingdom
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