TIDMAIE
RNS Number : 9065R
Ashoka India Equity Investment Tst
06 March 2023
ASHOKA INDIA EQUITY INVESTMENT TRUST PLC
HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHSED 31 DECEMBER
2022
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 investment in securities listed in
India and listed securities of companies with a significant
presence in India.
Financial information
As at As at
31 December 30 June 2022
2022 (unaudited) (audited)
Net asset value ("NAV") per Ordinary
Share (cum income) 191.6p 174.2p
Ordinary Share price 192.0p 175.0p
Ordinary Share price premium to NAV
(1) 0.2% 0.5%
Net assets GBP215.9 million GBP187.4 million
--------------------------------------- ------------------- ------------------
For the For the
six months six months
ended 31 December ended
2022 (unaudited) 31 December
Performance summary 2021 (unaudited)
% change (2,3) % change (2,3)
Share price total return per Ordinary
Share (1) 9.7% 26.2%
NAV total return per Ordinary Share
(1) 10.0% 25.2%
MSCI India IMI Index (sterling terms) 9.9% 15.4%
--------------------------------------- ------------------- ------------------
1 Alternative Performance measures.
2 Total returns in Sterling for the six month period.
3 Source: Bloomberg.
Alternative Performance Measures ("APMs")
The items in the Financial information and the Performance
summary indicated in the footnote above, are considered to
represent APMs of the Company. Definitions of these APMs together
with how these measures have been calculated can be found in the
half-yearly report.
Chairman's Statement
Global difficulties have continued to make life challenging for
economic growth with Russia's illegal invasion of Ukraine creating
daily headlines. This has caused supply chain issues to reverberate
around the world leading to energy insecurity, inflationary
pressures and unnecessary loss of life. It is a tragedy unfolding
before our eyes but, regardless, our lives must go on.
I am pleased to present the Company's half-year financial report
for the period 1 July 2022 to 31 December 2022 and, given this
backdrop, it is all the more remarkable that the Company continued
to make headway and achieve a positive return, just ahead of its
benchmark index, the MSCI India IMI.
Performance
In the period under review, the Company's share price and NAV
have recorded total returns in sterling terms of 9.7% and 10.0%
respectively, compared to 9.9% for the benchmark index. The
Investment Managers and Investment Adviser have used the authority
granted to them by shareholders to broaden the investment portfolio
into an increased number of positions which, given the growing
opportunities presented by entrepreneurial companies in the small
and mid-cap sectors and those newly coming to market, allows them
greater flexibility to identify and invest in India's best
companies. As ever, the Investment Manager's report that follows
goes into more detail.
The Company's shares traded at a premium to NAV (cum income) of
0.2% at the end of the period.
Performance fee
No accrual for a performance fee has been made for the period,
nor since the start of the measurement period on 1 July 2021. The
Company's positive performance during the period does not yet
exceed the starting net asset value per share adjusted by the
percentage total return of the MSCI India IMI Index (in Sterling)
over the performance period. If a performance fee liability
crystallises, it will be duly reflected and accrued in the
Company's daily net asset value announcement.
Share Issuance
The Company again issued new shares during the period under
review reflecting continued confidence from existing shareholders
and growing belief from new investors both in the Indian economy as
a whole and the Investment Team's ability to outperform over the
longer term. This resulted in the issuance of 5.08 million new
shares raising gross proceeds of GBP10.4 million. New Ordinary
Shares are issued at a small premium to the prevailing net asset
value to ensure no dilution to existing shareholders. The Company's
net asset value and market capitalization at the calendar year-end
were GBP215.9 million and GBP216.3 million respectively. As at the
date of this report the Company's total assets stood at GBP220
million.
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, the Company may declare
an annual dividend to maintain UK investment trust status if there
is a sufficient surplus. In the period under review, no interim
dividend has been declared.
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 fourth
Redemption Point for the Ordinary Shares was on 30 September 2022.
I am pleased to report that redemption requests for just 124,374
shares were received and that these redeemed shares were matched
with demand from other shareholders in the stock market by the
Company's corporate broker, Peel Hunt. The Board has absolute
discretion to operate the annual redemption facility on any given
Redemption Point and to accept or decline in whole or in part any
redemption request.
Shareholders are reminded that investment in a Company of this
nature should only be considered if it is understood that the
significant growth potential of the Indian equity market is likely
to be achieved over the medium to longer term, a minimum of five
years.
Outlook
If one truly believed the daily press, investors could be
forgiven for feeling gloomy. High inflation, rising interest rates,
cost of living pressures and low growth forecasts enable editors to
feature depressing headlines. However, the signs are becoming
clearer that interest rates and inflation may be at or near their
peaks in Europe and the US, energy prices are a fraction of their
previous highs and the jobs market remains strong. India, whilst
not having been immune from these global pressures, is particularly
well placed to benefit from an upturn in global activity.
Domestic demand in India remains strong and the economy is being
bolstered by recovering export growth. The shift of manufacturing
from China to India is occurring even faster than anticipated and
it is predicted that this trend will accelerate thus creating
greatly increased job opportunities and prosperity. In addition,
India is adopting a number of green initiatives that will not only
create a large number of jobs and help wean the country off
dependence on imported oil but greatly assist its commendable
ambition of achieving net zero by 2070. India's GDP growth in 2023
is forecast to be the highest in the world and if the economy
continues to grow apace, it will overtake countries such as
Germany, Japan, France and the UK to become the third largest
within 10 years.
As I repeat almost ad nauseum, your Investment Manager and
Investment Adviser remain focused on strong corporate governance
applied before each stock is selected for the portfolio, an
approach strongly supported by the Board and one that, judging by
recent events, continues to pay dividends. The portfolio's
constituents are selected for their superior future growth
prospects and avoidance of misgovernance, wherever possible, is
highly desirable.
Both Acorn and White Oak remain focused on delivering
outstanding returns from a diversified portfolio of investments
from across the market cap spectrum. Your Board has great
confidence in their abilities to outperform and produce superior
returns from one of the world's most dynamic and fastest-growing
markets.
As ever, I thank you for your continued support as a shareholder
of this Company.
Andrew Watkins
Chairman
6 March 2023
Investment Manager's Report
During the latter half of 2022, the Company's total NAV return
outperformed the index by 0.1% delivering 10.0%, compared to 9.9%
for the MSCI India IMI (in sterling terms). Since 31 July 2018 (the
date post IPO when the Company was fully invested), the Company has
delivered 45.8% of net cumulative outperformance, with a 93.0%
absolute return compared to the benchmark return of 47.2%, both in sterling terms.
Key contributors
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 like
ICICI Bank, are gaining market share from state-owned banks, which
account for two- thirds of the loan market. 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 return ratios. The bank's asset quality
has also remained robust. The stock outperformed as a result of
continued strong business performance.
Titan is the leading jewelry company in India which also has a
presence in other segments such as watches, eyewear, fragrances,
precision engineering, and women's ethnic wear. Titan is a luxury
lifestyle retailer which commands premium brand positioning across
segments. The company's well-tuned operating model allows it to
generate industry-leading return ratios, whilst maintaining robust
growth. Titan's jewelry market share is still in the mid-single
digits, with significant scope for sustained expansion. Recent
outperformance likely reflects continued strength in discretionary
consumption within Titan's core target group - middle and
high-income urban households.
Cholamandalam Investment and Finance (CIFC) is a non-banking
financial company (NBFC) belonging to the Chennai-based Murugappa
Group. It primarily operates in vehicle finance (including
Commercial Vehicles, Passenger Vehicles, Two and Three-Wheelers),
home equity, and the affordable home loans category. In terms of
customer profile, it caters predominantly to single truck and small
fleet owners, self-employed non-professionals and Micro, Small and
Medium Enterprise (MSME) businesses in semi-urban and rural India.
CIFC's strength lies in its ability to reach such customers in
rural and semi-urban markets and its ability to underwrite and
collect from customers whose income streams are less predictable.
While the concerns regarding asset quality due to Covid have been
allayed, the vehicle finance business is likely entering an upcycle
given demand has been weak in the last couple of years. Apart from
briskly scaling up its housing finance business, which from a low
base could grow upwards of 25% in the coming years, the company has
also made progress in three new segments: Consumer & Small
Enterprise Loan; Secured Business & Personal Loan; and Small
Medium Enterprises Loan business. These reasons contributed to the
outperformance of the stock.
Key Detractors
PB Fintech operates Policybazaar.com, India's largest Insurance
Web Aggregator, and Paisabazaar.com, one of India's leading
financial products marketplaces. Policybazaar.com facilitates
online comparison and the purchase of insurance policies and has a
dominant 90% market share in the insurance web aggregator segment.
Over the last five years, revenues and underlying premiums have
grown multi-fold. In addition, Paisabazaar.com is one of the
leading players in the personal loan and credit card business.
Though this business will take time to break even, it has a long
runway for growth and represents a significant future business
value for the company. Recently, the competition faced by both
Policybazaar.com and Paisabazaar.com has increased substantially
and the sentiment towards new-age technology companies has slightly
weakened. These reasons have contributed to the underperformance of
the stock in the second half of 2022.
Intellect Design Arena is a financial services software company
and is regarded as one of the leading solution providers in
transaction banking software, which accounts for 45% of its
revenues. It has also made significant inroads in other product
suites including payments, retail banking, digital banking and
insurance. Intellect has cumulatively invested over US$200 million
in product R&D over the last decade and has built a strong
reputation in developed and emerging markets on the back of a
marquee client list which includes JP Morgan, HSBC and Barclays.
Its profitability has improved significantly over the last few
years from single-digit operating margins to over 20%, due to scale
and operational efficiencies. The stock underperformed due to lower
than expected near-term performance.
Dodla Dairy is a leading dairy company in South India with
strong brands, a well-developed direct procurement network and a
healthy portfolio of value- added products. Premiumization is
likely to be a key driver of the organized dairy sector's growth
and well- run companies in the private sector (such as Dodla Dairy)
will benefit from this long-term tailwind. The company's
underperformance is directly attributed to rising concerns about
raw material supply, following the spread of lumpy skin disease in
cows in parts of India.
Investment Outlook
Indian equity markets delivered a resilient performance in 2022,
despite a challenging global macroeconomic environment. This was
underpinned by strong fundamentals, healthy domestic demand, and
the government's continued push on capital expenditure. Whilst most
major economies expect to experience a slowdown in GDP growth in
2023, India remains one of the fastest-growing major economies in
the world. As per consensus estimates, India is poised to become
the third-largest economy (by nominal GDP) within the next 10
years.
Post COVID-19, the revival of export growth has been a key
contributor to India's economic recovery. India's merchandise
exports touched a record US$420 billion in the financial year
2021-22, after stagnating in the US$300 billion range for the last
decade. Supply chain disruptions have accelerated the relocation of
manufacturing out of China, with India emerging as a credible
alternative. Policy supports in the form of Product Linked
Incentive ("PLI") schemes for key sectors, and measures to improve
the 'ease of doing business' have emerged as critical enablers.
India has a marginal market share in many manufacturing industries,
and even a 1-2% incremental market share gain from China could
result in high-teens growth rates.
From a services perspective, Indian IT companies benefit from
the accelerated digital transformation of global enterprises and
cloud adoption. Enhanced by the business continuity showcased
during COVID-19 lockdowns, global customers have preferred Indian
IT & engineering services providers due to their exceptional
talent pool and depth of competencies across service lines. The
country's services export is expected to reach an all-time high of
US$325 billion during the financial year 2022-23. This favourable
dynamic is helping India boost its foreign exchange reserves,
thereby increasing the cushion against external shocks.
On the domestic front, the government is supporting the economy
through various supply-side measures. Infrastructure Capital
Expenditure ("CapEx") continues its strong momentum with spending
in sectors such as roads and railways the key focus areas for the
government. As a proportion of GDP, capital expenditure edged
closer to the levels witnessed between 2003 and 2006, which
coincided with strong private sector CapEx and corporate earnings
growth. The green shoots of private sector CapEx in asset-heavy
sectors, such as cement and steel, are also visible. This is due to
significantly deleveraged balance sheets and improved operating
performance supported by an uptick in demand for housing and real
estate.
Corporate earnings are predicted to remain resilient in 2023.
MSCI India's consensus earnings growth for 2023 to 2024 is
approximately 15%, compared with approximately 13% for China and
approximately 9% for the APAC (ex-Japan) region - with financials,
CapEx- sensitive, and consumer sectors driving most of the earnings
growth. The underlying multi-decadal trend of market share
consolidation in favour of stronger, well- run businesses
continues. The unbranded segment of the market has found it
challenging to deal with higher input costs and frequent supply
chain disruptions. However, the businesses in the portfolio have
shown immense resilience due to their industry leadership and
strong execution capabilities, supported by robust balance
sheets.
The recently announced Union Budget for the financial year
2023-24 builds on the foundation of sustainable growth laid out in
previous budgets while signalling policy continuity with a focus on
public CapEx, enhancing the ease of doing business and boosting
exports and manufacturing. There is also an added emphasis on
inclusive growth and green energy. The key announcements
included:
-- development of physical infrastructure, with the overall
public sector CapEx projected to increase by 33% year-on-year to
3.3% of GDP;
-- measures for further improving the ease of doing business
with proposals to reduce compliance burdens, faster dispute
resolution, continuous digitalization of public infrastructure and
decriminalizing numerous legal provisions;
-- managing the environment and climate (details covered below); and
-- boosting manufacturing and exports through cuts and
exemptions in customs/excise duties and investing in skills
development.
From a 6.4% fiscal deficit in financial fear 2023, the
government intends to follow the fiscal consolidation roadmap,
prudently reducing the deficit to 5.9% of GDP in financial year
2024 and reaching below 4.5% by financial year 2026. To summarise,
the government has resisted the temptation to be populist, despite
this being a pre-election year budget.
At the 2021 United Nations Climate Change Conference (COP-26),
India pledged to achieve net-zero carbon emissions by 2070. The
government continues its focus on reducing the dependence on fossil
fuels with its recent budget. It has allocated US$4.3 billion for
energy transition expenditure by 2030. This includes the national
green hydrogen mission, enhancing development and the use of
renewables. The National Green Hydrogen Mission alone aims to
develop a green hydrogen production capacity of at least five
million metric tonnes per annum, with an associated renewable
energy capacity addition of about 125 gigawatts in the country.
This would result in total investments of over US$98 billion and
would generate over 600,000 jobs. Based on past achievements, we
believe India could become a global leader in green hydrogen and
significantly reduce its reliance on imported fuel.
From a potential risk perspective, private investments have
remained subdued in the last decade, thereby holding back a
domestic cyclical earnings recovery. An absence of any consistent
improvement in external demand, escalation in geo-political
tensions, or the onset of another COVID-19 wave weighing on
domestic demand could pose risks to near-term growth. However, we
believe the ingredients of an investment cycle revival remain
skewed towards the positive, given the strong position of
corporates and the financial sector and the government's push for
infrastructure.
General elections in India are likely to be held in April or May
2024. Though the current Prime Minister's popularity remains strong
and the risk of regime change appears low, such an event or a weak
coalition central government could be a negative surprise for the
markets, which would like to see policy continuity. Of course, 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 sentiments.
The Investment Manager believes that the most attractive aspect
of investing in India is the outsized alpha opportunity that the
market presents compared to any other equity market globally given
that the Indian market is still relatively under-researched and
under- brokered. Such alpha opportunities are present across the
large, mid, and small cap spectrum. In particular, the SMID (small
& mid) cap segment of the Indian equity market has a large, and
expanding, number of listed businesses to choose from. Besides the
large number of listings, the SMID-cap segment also tends to have
very heterogeneous business models which makes it fertile hunting
ground for bottom-up stock pickers.
The SMID-cap segment also tends to have lower liquidity compared
to the large cap peers. Hence, from a risk management and liquidity
management perspective, the Investment Manager believes it is
desirable to have smaller position sizes in SMID-cap names. Thus,
having a higher number of names in the portfolio optimises alpha
extraction from a larger universe of SMID-cap names, while being
prudent on risk and liquidity considerations.
We believe India is at the cusp of realising its true economic
potential, while benefitting from several secular tailwinds. The
most important are its favourable demographics and rising income
levels, thereby allowing domestic consumption to flourish - with
demand for discretionary goods, travel & leisure, financial and
healthcare services on the rise. Additionally, the country is
experiencing rapid digitalisation of services, supported by
increasing Internet penetration, and formalisation on the back of
crucial on-going structural reforms. The government is undertaking
steps to manufacture imported goods domestically while developing
the country's infrastructure like never before. We believe that all
these factors place India as one of the most promising economies
for years to come and makes for a highly compelling investment
proposition.
Acorn Asset Management Ltd
6 March 2023
TOP TEN HOLDINGS
Top Ten Holdings
As at 31 December 2022 % of
net assets
-------------------------------------------- ------------
ICICI Bank Ltd 6.8
Infosys Ltd 5.0
Ambuja Cements Ltd 3.4
Cholamandalam Investment and Finance Co Ltd 3.4
Titan Co Ltd 3.3
Kaynes Technology India Limited 2.8
HDFC Bank Ltd 2.7
Maruti Suzuki India Ltd 2.6
Asian Paints Ltd 2.6
Nestle India Ltd 2.5
Top 10 35.1
Other holdings 64.4
Total Holdings 99.5
Cash/Others 0.5
Total Net assets 100
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management
Report in accordance with the Financial Conduct Authority's ("FCA")
Disclosure Guidance and Transparency Rules ("DTR"). The Directors
consider that the Chairman's Statement and the Investment Manager's
Report in the Half-Yearly Report provide details of the important
events which have occurred during the period and their impact on
the financial statements. The following statement on related party
transactions and the Directors' Responsibility Statement below, the
Chairman's Statement and Investment Manager's Report together
constitute the Interim Management Report of the Company for the six
months ended 31 December 2022. The outlook for the Company for the
remaining six months of the year ending 30 June 2023 is discussed
in the Chairman's Statement and the Investment Manager's
Report.
Principal and emerging risks and uncertainties
The principal and emerging risks and uncertainties to the
Company are detailed on pages 14 to 17 of the Company's most recent
Annual Report and Audited Financial Statements for the year ended
30 June 2022 which can be found on the Company's website at
https://www. ashokaindiaequity.com. The principal and emerging
risks and uncertainties facing the Company remain unchanged from
those disclosed in the Annual Report for the year ended 30 June
2022 and the Board are of the opinion that they will continue to
remain unchanged for the forthcoming six-month period. The
principal and emerging risks and uncertainties facing the Company
are as follows:
(i) market risks (economic conditions and sectorial diversification);
(ii) corporate governance and internal control risks (including cyber security);
(iii) regulatory risks; and
(iv) financial risks.
Related party transactions
Details of the amounts paid to the Company's Investment Adviser
and the Directors during the period are detailed in the notes to
the Half-Yearly report and unaudited condensed financial statements
(the "Financial Statements").
Going concern
The Half-Yearly Report has been prepared on a going concern
basis. The Board considers this the appropriate basis as they have
a reasonable expectation that the Company has adequate resources to
continue in operational existence for at least the following
twelve- month period from the date of this report. 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. As at 31 December 2022 the Company held
GBP212.1 million (30 June 2022: GBP178.1 million) in quoted
investments and had cash of GBP6.1 million (30 June 2022: GBP7.0
million).
Unaudited
These Financial Statements have not been audited or reviewed by
auditors pursuant to the Financial Reporting Council guidance on
the Review of Interim Financial Information.
DIRECTORS' STATEMENT OF RESPONSIBILITY FOR THE HALF-YEARLY
REPORT
The Directors confirm to the best of their knowledge that:
-- these condensed set of financial statements contained within
the Half-Yearly Financial Report has been prepared in accordance
with IAS 34 Interim Financial Reporting; and
-- the Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's DTR.
Signed on behalf of the Board by
Andrew Watkins
Chairman
6 March 2023
FINANCIAL STATEMENTS
Condensed Unaudited Statement of
Comprehensive Income
For the six months ended 31 December 2022
Six months ended Six months ended
31 December 2022 (unaudited) 31 December 2021 (unaudited)
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----- ---------- ---------- ---------- ---------- ---------- ----------
Gains on investments 3 - 21,460 21,460 - 41,272 41,272
Losses on currency movements - (346) (346) - (28) (28)
Net investment gains - 21,114 21,114 - 41,244 41,244
Income 5 799 - 799 559 - 559
------------------------------ ----- ---------- ---------- ---------- ---------- ---------- ----------
Total income 799 21,114 21,913 559 41,244 41,803
Performance fees 7 - - - - (2,437) (2,437)
Operating expenses 8 (376) - (376) (312) - (312)
------------------------------ ----- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit before
taxation 423 21,114 21,537 247 38,807 39,054
Taxation 9 (88) (3,255) (3,343) (125) (3,880) (4,005)
------------------------------ ----- ---------- ---------- ---------- ---------- ---------- ----------
Profit for the period 335 17,859 18,194 122 34,927 35,049
------------------------------ ----- ---------- ---------- ---------- ---------- ---------- ----------
Earnings per Ordinary Share 10 0.31p 16.31p 16.62p 0.13p 38.55p 38.68p
------------------------------ ----- ---------- ---------- ---------- ---------- ---------- ----------
There is no other comprehensive income and therefore the 'Profit
for the period' is the total comprehensive income for the
period.
The total column of the above statement is the statement of
comprehensive income 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 ("AIC").
All revenue and capital items in the above statement derive from
continuing operations.
Condensed Unaudited Statement of Financial Position
As at 31 December 2022
31 December 2022 30 June 2022
(unaudited) (audited)
Note GBP'000 GBP'000
---------------------------------------- ----- ----------------- -------------
Non-current assets
Investments held at fair value through
profit or loss 3 214,661 183,361
---------------------------------------- ----- ----------------- -------------
Current assets
Cash and cash equivalents 6,052 7,027
Dividend receivable - 188
Other receivables 156 42
-------------
6,208 7,257
---------------------------------------- ----- ----------------- -------------
Total assets 220,869 190,618
---------------------------------------- ----- ----------------- -------------
Current liabilities
Other payables 6 (165) (203)
Non-Current liabilities
Capital gains tax provision (4,848) (3,029)
-------------
Total liabilities (5,013) (3,232)
---------------------------------------- ----- ----------------- -------------
Net assets 215,856 187,386
---------------------------------------- ----- ----------------- -------------
Equity
Share capital 12 1,126 1,076
Share premium account 100,696 90,470
Special distributable reserve 13 44,276 44,276
Capital reserve 69,543 51,684
Revenue reserve 215 (120)
-------------
Total equity 215,856 187,386
---------------------------------------- ----- ----------------- -------------
Net asset value per Ordinary Share 14 191.6p 174.2p
---------------------------------------- ----- ----------------- -------------
Condensed Unaudited Statement of Changes in Equity
For the six months ended 31 December 2022 (Unaudited)
Share Special
Share premium distributable Capital Revenue
Capital account reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------ -------- -------- -------------- -------- -------- --------
Opening balance as at 1
July 2022 1,076 90,470 44,276 51,684 (120) 187,386
Profit for the period - - - 17,859 335 18,194
Issue of Ordinary Shares
* 12 50 10,349 - - - 10,399
Share issue cost - (123) - - - (123)
Closing balance as at 31 December
2022 1,126 100,696 44,276 69,543 215 215,856
------------------------------------- -------- -------- -------------- -------- -------- --------
For the six months ended 31 December 2021
(Unaudited)
Share Special
Share premium distributable Capital Revenue
Capital account reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------ -------- -------- -------------- -------- -------- --------
Opening balance as at 1
July 2021 860 49,099 44,276 42,466 (126) 136,575
Profit for the period - - - 34,927 122 35,049
Issue of Ordinary Shares 12 131 25,581 - - - 25,712
Share issue costs - (329) - - - (329)
Closing balance as at 31 December
2021 991 74,351 44,276 77,393 (4) 197,007
------------------------------------- -------- -------- -------------- -------- -------- --------
* During the period, the Company issued 5,076,184 new Ordinary
Shares with gross aggregate proceeds of GBP10.4 million.
The Company's distributable reserves consist of the special
distributable reserve, capital reserve and revenue reserve.
Condensed Unaudited Statement of Cash Flows
For the six months ended 31 December 2022
For Six Months For Six Months
ended 31 December ended 31 December
2022 2021
(unaudited) (unaudited)
Note GBP'000 GBP'000
---------------------------------------- ----- ------------------- -------------------
Cash flows from operating activities
Operating profit before taxation 21,537 39,054
Taxation paid (1,524) (1,859)
Decrease in receivables 75 579
(Decrease)/increase in payables (38) 2,436
Gains on investments 3 (21,460) (41,272)
Net cash flow used in operating
activities (1,410) (1,062)
---------------------------------------- ----- ------------------- -------------------
Cash flows from investing activities
Purchase of investments (52,018) (59,908)
Sale of investments 42,177 51,852
Net cash flow used in investing
activities (9,841) (8,056)
---------------------------------------- ----- ------------------- -------------------
Cash flows from financing activities
Proceeds from issue of shares 12 10,399 17,719
Share issue costs (123) (329)
Net cash flow generated from financing
activities 10,276 17,390
---------------------------------------- ----- ------------------- -------------------
(Decrease)/Increase in cash and
cash equivalents (975) 8,272
---------------------------------------- ----- ------------------- -------------------
Cash and cash equivalents at start
of period 7,027 7,447
---------------------------------------- ----- ------------------- -------------------
Cash and cash equivalents at end
of period 6,052 15,719
---------------------------------------- ----- ------------------- -------------------
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 London Stock Exchange ("LSE"). The financial statements of the
Company are presented for the period from 1 July 2022 to 31
December 2022.
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 and statement of compliance
These Condensed Unaudited Financial Statements have been
prepared in accordance with International Accounting Standard
("IAS") 34 as required by DTR 4.2.4R, the Listing Rules of the LSE
and applicable legal and regulatory requirements. They do not
include all the information and disclosures required in Annual
Financial Statements and should be read in conjunction with the
Company's last Annual Audited Financial Statements for the year
ended 30 June 2022.
The accounting policies applied in these Financial Statements
are consistent with those applied in the last Annual Audited
Financial Statements for the year ended 30 June 2022, which were
prepared in accordance with UK-adopted international accounting
standards. Having reassessed the principal risks, the Directors
considered it appropriate to adopt the going concern basis of
accounting in preparing these Financial Statements.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements.
Details of the Directors' assessment of the going concern status
of the Company, which considered the adequacy of the Company's
resources, are given in the half-yearly report . The Directors have
a reasonable expectation that the Company has adequate operational
resources to continue in operational existence for at least twelve
months from the date of approval of these financial statements.
Significant judgements and estimates
There have been no changes to the significant accounting
judgements, estimates and assumptions from those applied in the
Company's Audited Annual Financial Statements for the year ended 30
June 2022.
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 when the Company disposes of
investments. The current provision on 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 period end. The
short-term tax rates are 15% and the long-term tax rates are 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 of GBP4,848,000 (30 June 2022:
GBP3,029,000) in respect of unrealised gains on investments
held.
Adoption of new IFRS standards
A number of new standards, amendments to standards and
interpretations are effective for the annual periods beginning
after 1 January 2022. None of these are expected to have a material
impact on the measurement of the amounts recognised in the
financial statements of the Company.
3. Investment held at fair value through profit or loss
(a) Investments held at fair value through profit or loss
As at As at
31 December 30 June
2022 2022
(unaudited) (audited)
------------------------------- ------------- -----------
GBP'000 GBP'000
Quoted investments in India 212,067 177,998
Unquoted investments in India 2,594 5,363
------------------------------- ------------- -----------
Closing valuation 214,661 183,361
------------------------------- ------------- -----------
(b) Movements in valuation
For the For the
six months ended year ended
31 December
2022 30 June
(unaudited) 2022
(audited)
GBP'000 GBP'000
----------------------------- ---- ------------------- -------------
Opening valuation 183,361 147,399
Opening unrealised gains on
investments 29,059 46,121
----------------------------------- ------------------- -------------
Opening book cost 154,302 101,278
Additions, at cost 51,928 121,568
Disposals, at cost (31,727) (68,544)
----------------------------------- ------------------- -------------
Closing book cost 174,503 154,302
Revaluation of investments 40,158 29,059
----------------------------------- ------------------- -------------
Closing valuation 214,661 183,361
----------------------------------- ------------------- -------------
Transaction costs on investment purchases for the six months
ended 31 December 2022 amounted to GBP89,000 (31 December 2021:
GBP43,000) and on investment sales for the six months to 31
December 2022 amounted to GBP86,000 (31 December 2021:
GBP81,000).
(c) Gains on investments
For the
For the year ended
six months ended 30 June
31 December
2022 2022
(unaudited) (audited)
GBP'000 GBP'000
------------------------------------------- ---- ------------------ -------------
Realised gains on disposal of investments 10,536 25,241
Transaction costs (175) (331)
Movement in unrealised gains/(losses)
on investments held 11,099 (17,062)
------------------------------------------------- ------------------ -------------
Total gains on investments 21,460 7,848
------------------------------------------------- ------------------ -------------
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; and
- Level 3: inputs other than quoted prices included within level
1 that are observable for the asset or liability, either directly
or indirectly.
The classification of the Company's investments held at fair
value is detailed in the table below:
As at 31 December 2022 (unaudited)
Level Level
1 Level 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- ---------- --------- --------
Investments at fair value through
profit and loss:
Quoted investments in India 212,067 - - 212,067
Unquoted investments in India - - 2,594 2,594
----------------------------------- --------- ---------- --------- --------
212,067 - 2,594 214,661
----------------------------------- --------- ---------- --------- --------
As at 30 June 2022 (audited)
Level Level
1 Level 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- --------- -------- --------
Investments at fair value through
profit and loss:
Quoted investments in India 177,998 - - 177,998
Unquoted investments in India - - 5,363 5,363
----------------------------------- -------- --------- -------- --------
177,998 - 5,363 183,361
----------------------------------- -------- --------- -------- --------
The movement on the Level 3 unquoted investments during the
period is shown below:
As at As at
31 December 30 June
2022 2022
(unaudited) (audited)
GBP'000 GBP'000
---------------------------------- --------------- -------------
Opening balance 5,363 6,323
Additions during the period/year 210 5,416
Disposals during the period/year (2,861) (6,323)
Valuation adjustments (118) (53)
Closing balance 2,594 5,363
---------------------------------- --------------- -------------
4. Financial risk management
At 31 December 2022, the Company's financial risk management
objectives and policies are consistent with those disclosed in the
Company's last Annual Report and Audited Financial Statements for
the year ended 30 June 2022.
5. Income
For the For the
six months ended six months ended
31 December 31 December
2022 2021
(unaudited) (unaudited)
GBP'000 GBP'000
------------------------- ------------------ ------------------
Income from investments
Overseas dividends 799 559
Total income 799 559
------------------------- ------------------ ------------------
6. Other payables
As at As at
31 December 30 June
2022 2022
(unaudited) (audited)
GBP'000 GBP'000
---------------------- ------------- -----------
Accrued expenses 165 203
Total other payables 165 203
---------------------- ------------- -----------
7. Performance fees
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 Index in the medium term. The performance fee is measured
over periods of three years (Performance Period). The first
Performance Period ended on 30 June 2021 (approximately three years
from the Company's IPO). The Investment Manager's second
Performance Period commenced on 1 July 2021 and will end in 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 Index (sterling) 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 31 December 2022, there was no performance fee payable to
the Investment Manager (30 June 2022: Nil).
8. Operating expenses
For the For the
six months ended six months ended
31 December 2022 31 December 2021
(unaudited) (unaudited)
GBP'000 GBP'000
----------------------------------- ------------------ ------------------
Administration & secretarial fees 73 73
Auditor's remuneration *
- Statutory audit fee 24 20
Broker fees 17 16
Custody services 14 11
Directors' fees 64 64
Board trip to India costs 5 3
Tax compliance and advice 14 15
Printing and public relations 83 25
Registrar fees 15 9
Legal Fees 15 20
UKLA and other regulatory fees 6 5
Other expenses 46 51
-----------------------------------
Total 376 312
----------------------------------- ------------------ ------------------
* Auditor's remuneration excludes VAT.
9. Taxation
a) Analysis of charge in the period
For the six months ended For the six months ended
31 December 2022 (unaudited) 31 December 2021 (unaudited)
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Capital gains tax provision - - - - 1,475 1,475
Capital gains expense - 3,255 3,255 - 2,405 2,405
Indian withholding tax 88 - 88 125 - 125
Total tax charge for the
six months 88 3,255 3,343 125 3,880 4,005
----------------------------- ---------- ---------- ---------- ---------- ---------- ----------
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 period
The effective UK corporation tax rate for the period is 19%. 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:
For the For the
six months ended six months ended
31 December 31 December 2021
2022 (unaudited) (unaudited)
GBP'000 GBP'000
------------------------------------------ ------------------- ------------------
Operating profit before taxation 21,537 39,054
UK Corporation tax at 19% (2022: 19.00%) 4,092 7,420
Effects of:
Indian capital gains tax provision
not taxable 3,255 3,880
Gains on investments not taxable (4,012) (7,836)
Overseas dividends not taxable (152) (106)
Unutilised management expenses 72 522
Indian withholding tax 88 125
Total tax charge for the six months 3,343 4,005
------------------------------------------ ------------------- ------------------
10. Earnings per Ordinary Share
For the six months For the six months
ended ended
31 December 2022 (unaudited) 31 December 2021 (unaudited)
Revenue Capital Total Revenue Capital Total
--------------------------------- ------------ ----------- -------- ------------ ----------- --------
Profit for the period (GBP'000) 335 17,859 18,194 122 34,927 35,049
------------
Return per Ordinary Share 0.31p 16.31p 16.62p 0.13p 38.55p 38.68p
--------------------------------- ------------ ----------- -------- ------------ ----------- --------
Earnings per Ordinary Share is based on the profit for the
period of GBP18,194,000 (31 December 2021: GBP35,049,000)
attributable to the weighted average number of Ordinary Shares in
issue during the six months ended 31 December 2022 of 109,501,337
(31 December 2021: 90,592,560).
11. Dividend
The Company's objective is to provide shareholder returns
through capital growth with income being a secondary consideration.
Therefore, it is unlikely that the Company will pay a dividend
under normal circumstances.
12. Share capital
As at 31 December As at 30 June
2022 2022
(unaudited) (audited)
No. No.
of shares GBP'000 of shares GBP'000
--------------------------------------- ------------ -------- ------------ --------
Allotted, issued and fully paid:
Redeemable Ordinary Shares of 1p each
('Ordinary Shares') 112,643,856 1,126 107,567,672 1,076
Total 112,643,856 1,126 107,567,672 1,076
--------------------------------------- ------------ -------- ------------ --------
Ordinary Shares
The Ordinary Shares have attached to them full voting, dividend
and capital distribution rights and confer rights of
redemption.
Between 1 July 2022 and 31 December 2022, 5,076,184 Ordinary
Shares (30 June 2022: 22,590,042 Ordinary Shares issued) have been
issued; raising aggregate gross proceeds of GBP10,339,000 (30 June
2022: GBP42,102,000).
Since 31 December 2022, there have been no shares issued. As at
the date of this Annual Report, the total number of Ordinary Shares
in issue is 112,643,856.
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 GBP1.00 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 GBP44,275,898. This reserve may also be
used to fund dividend payments.
14. Net asset value ("NAV") per Ordinary Share
Net assets per ordinary share as at 31 December 2022 is based on
GBP215,856,000 (30 June 2022: GBP187,386,000) of net assets of the
Company attributable to the 112,643,856 (30 June 2022: 107,567,672)
Ordinary Shares in issue as at 31 December 2022.
15. Related party transactions
There were no fees payable to the Investment Manager.
White Oak Capital Partners provides investment advisory services
to the Investment Manager and no fees are paid to them from the
Company.
The annual remuneration of the Board is GBP40,000 to the
Chairman, GBP32,500 to the Chair of the Audit Committee, and
GBP27,500 to the other Directors. The Directors have the option to
receive their fees in cash or in shares in the Company.
The Directors had the following shareholdings in the Company,
all of which are beneficially owned.
As at As at
31 December 30 June
2022 2022
(unaudited) (audited)
------------------ -------------- ------------
Andrew Watkins 94,425 94,425
Jamie Skinner 86,806 84,733
Rita Dhut 81,733 81,733
Dr. Jerome Booth 68,957 66,202
------------------ -------------- ------------
16. Subsequent events
There have been no significant events since the period end which
would require revision of the figures or disclosure in the
Financial Statements.
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 share.
As at As at
31 December 30 June
2022 2022
(unaudited) (audited)
NAV per Ordinary Share (pence) a 191.6 174.2
Share price (pence) b 192.0 175.0
=============================== ============= ============= ===========
Premium (b÷a)-1 0.2% 0.5%
=============================== ============= ============= ===========
Share price/NAV total return
A measure of performance that includes both income and capital
returns.
For the six months ended 31 December Share price NAV
2022
(unaudited)
Opening at 1 July 2022 (p) a 175.0 174.2
Closing at 31 December 2022 (p) b 192.0 191.6
===================================== ============= =========== =====
Total return (b÷a)-1 9.7% 10.0%
===================================== ============= =========== =====
For the six months ended 31 December Share price NAV
2021
(unaudited)
Opening at 1 July 2021 (p) a 162.5 158.9
Closing at 31 December 2021 (p) b 205.0 198.9
===================================== ============= =========== =====
Total return (b÷a)-1 26.2% 25.2%
===================================== ============= =========== =====
n/a = not applicable.
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