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 Share1,2
|
35.9%
|
19.4%
|
NAV total return per Ordinary
Share1
|
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