TIDMAIE
RNS Number : 0390P
Ashoka India Equity Investment Tst
09 October 2023
ASHOKA INDIA EQUITY INVESTMENT TRUST PLC
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2023
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 2023 As at 30 June 2022
Net asset value ("NAV") per Ordinary Share (cum income) 206.2p 174.2p
Ordinary Share price 209.0p 175.0p
Ordinary Share price premium to NAV (1) 1.4% 0.5%
Net assets GBP232.6million GBP187.4million
========== ==========
Performance summary
30 June 2023 30 June 2022
% change % change
Share price total return per Ordinary Share (1, 2) 19.4% 7.7%
NAV total return per Ordinary Share (1) 18.3% 9.6%
MSCI India IMI Index total return (Sterling terms) (2,3) 11.8% 7.2%
========== ==========
1 These are Alternative Performance Measures.
2 Total returns in sterling for the year ended 30 June 2023 and 2022.
3 Source: Bloomberg
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 in the Annual Report.
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
Welcome to the fifth annual results of Ashoka India Equity
Investment Trust plc for the year to 30 June 2023. When the Company
was launched in 2018, no-one could have predicted the events that
soon followed, particularly the Covid pandemic that so damaged the
world's economy and cost too many lives but also the devastating
war in Ukraine that, at the very least, threatens food supplies
globally, especially to the poorest countries. Neither, I think,
would we have confidently predicted that both the Company's net
asset value and share price would more than double in that period
as the Investment Manager and Investment Adviser used their
considerable skills to invest in the companies benefiting most from
India's fast-growing economy.
But here we are, with Covid behind us but, very sadly, the war
still raging. What a sad indictment this is of a modern, high-tech
world that man should be fighting man in the equivalent of early
twentieth century trench warfare.
I make no apologies for these references, yet again, in my
annual statement because although global trade has made the world a
much smaller place, such "disruptions" make the life of an
investment manager increasingly difficult with many new obstacles
to navigate and questions to ask before making confident investment
decisions. This, then, makes the continuing outperformance of the
Company even more impressive.
Acorn Asset Management and White Oak Capital Management
(Investment Manager and Investment Adviser respectively) maintained
their focus and remained diligent, producing performance ahead of
the Company's benchmark index for the year under review. The
five-year numbers are particularly impressive.
PERFORMANCE
The Company's NAV returned 18.3% over the period and the share
price 19.4% against its benchmark index, the India Investible
Market Index ("MSCI IMI" or "MSCI India IMI Index (in sterling
terms)"), which returned 11.8%. Impressively, since the Company's
inception in July 2018, the NAV has increased by 110.4% and the
Company's share price by 109%, both comfortably ahead of the
benchmark index which grew by 60.9% (in sterling terms). The
Company's share price stood at 209p at the year end, a 1.4% premium
to NAV.
Since the end of the Company's 2023 financial year, both NAV and
share price have been strong; as at 4 October 2023, the latest
practicable date before publication of this report, the NAV was
226.26p and the share price stood at 229p.
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, 5,240,140 new
shares were issued during the year under review, raising a total of
GBP10,735,051. As at the year end there were 112,807,812 shares in
issue.
REVENUE AND DIVIDS
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 GBP128,000. No 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 Redemption Point
for the Ordinary Shares this year is 30 September 2023.
As announced on 5 September 2023, the total number of Ordinary
Shares in respect of which valid redemption requests were received
for this Redemption Point was 547,339.
On 2 October 2023, the Company announced that all of the 547,339
Ordinary Shares under the 2023 Redemption Facility were
successfully matched with buyers, at a price of 225.23 pence per
Ordinary Share.
PERFORMANCE FEE
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 IMI, over a three-year period ending 30
June 2024. Details of the performance fee can be found below.
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.
BOARD COMMITTEE VISIT TO SINGAPORE AND INDIA
It has been four years since the Board undertook a visit to the
offices of the Company's Investment Manager and Investment Adviser.
Since then, White Oak Capital Management has grown into a business
that manages over $5.5 billion on behalf of clients, has increased
in headcount, excluding salespeople, to over 50 investment
professionals and analysts based in Mumbai, London, Madrid and in
its recently-opened office in Singapore. A visit was, therefore,
overdue so a Committee of the Board visited Singapore and Mumbai
during March 2023. I am pleased to report that the Committee was
suitably impressed with how the business had grown without
compromising standards with regard to the stock selection process
or pre-investment corporate governance.
Under normal circumstances and to give appropriate comfort to
the Company's shareholders, the Board considers it best practice to
make a due-diligence visit to the Investment Manager's office every
three years. This year's trip took place in late March so the next
is scheduled for 2026.
ANNUAL GENERAL MEETING
The Company will hold its Annual General Meeting on 8 December
2023 at the offices of White Oak Capital Management Ltd at 13
Hanover Square, London W1S 1HN starting at 12 noon. An online
presentation will be given by the Investment Manager (given they
are not based in the UK) and the Board will be delighted to see all
shareholders who are able to attend in person.
OUTLOOK
The Investment Manager's report that follows goes into further
detail on the portfolio's performance over the last year and the
challenges they faced.
India has come a long way since Narendra Modi took over as Prime
Minister in 2014, initiating a plan for India to become a developed
nation within 25 years. It is certain that, come next year's
election, he will make much of the progress over that 10-year
period and he would be right to do so. India's population, at 1.4
billion, overtook China's this year and the differences between the
world's largest autocracy and the world's largest democracy in the
race for economic growth remain stark; China's leader favours a
retention of power over a well-functioning economy thus reducing
the potential for entrepreneurial flair that is so evident in
India. It seems very likely that growth will expand for the
foreseeable future with material investments in renewable energy,
high-speed railways and new roads in a generational boost to
India's economy. Of this expanding population, a significant number
will grow up as well-educated, tech-savvy individuals who speak
fluent English and, therefore, be well equipped to converse in the
business markets of the world. Hosting the G20 conference in
September added further to both India's and Modi's personal
status.
The "global south", as this part of the world is now being
referred to, is growing in importance, both geographically,
politically and economically. It is not at all unreasonable to
assume that India is the unelected leader of such a bloc and its
relevance and importance is only likely to grow in direct
proportion to its economic growth and continuing status as a
democracy, perhaps eventually leading to a permanent seat on the UN
Security Council, further burnishing Modi's personal credentials
and India's world status.
Global inflation is easing and, war to one side, India is coping
well with supply lines both in and out of the country. Growth is
forecast to reach 6% this year, materially in excess of any other
major economy, and is likely to continue apace into 2024-5.
Your Board is frequently informed of the innovative investment
possibilities presenting themselves to the Company's management
teams and, regardless of mentioned headwinds, the dynamism of
Indian entrepreneurs is self-evident and undimmed. Whilst it is
understandable for all parties to be excited by these investment
opportunities, I will repeat my annual mantra to shareholders that
strong corporate governance and research both continue to play
prominent roles when selecting every investment within the
Company's portfolio.
Here I go again, wishing that the following year is better than
the current one. Looking at last year's wish list, only the
satisfactory resolution of Russia's invasion of Ukraine has yet to
come to pass. Other factors, such as inflation, interest rates and
supply lines, all show signs of improvement. Stock markets
anticipate events 12- 18 months ahead but even optimistic investors
require signs that the world is not coming to an end any time soon.
I think the wish list remains the same, to which I will add "a
period of stability, peace and calm". India is exceptionally well
placed to continue its growth trajectory regardless but I'm sure
its people would not be averse to agreeing with me.
As ever, thank you for being a shareholder in the Company. The
Investment Manager and Investment Adviser remain as dedicated as
ever to their task and your Board are equally confident in their
ability to produce top quality returns for shareholders over the
longer term.
ANDREW WATKINS
Chairman
6 October 2023
Investment Manager's Report
Market Review
The MSCI India IMI Index (in sterling terms) was up by 11.8%
during the year to 30 June 2023, outperforming the broader emerging
markets but underperforming the developed markets. In the same
period, the MSCI Emerging Markets Index was down by 2.6%, the
S&P 500 returned 13.9%, and the MSCI World Index was up by
13.5% (all in sterling terms). Crude oil prices fell by 32.4% and
the Indian rupee depreciated by 7.3%. Amongst sectors, industrials,
financials and consumer staples outperformed whilst utilities,
energy and information technology underperformed.
PERFORMANCE REVIEW
The Company has delivered a sterling NAV total return of 18.3%
during the year, outperforming the benchmark MSCI India IMI (in
sterling terms) by 6.5%. Despite a turbulent market environment,
the portfolio has generally outperformed during the year given that
it is very 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
Contributors
Kaynes Technology is a fully integrated electronic manufacturing
service company with end-to- end operations delivering component
assemblies and box-build solutions. It provides value-added
electronics manufacturing services and original design
manufacturing solutions. The company holds long-term relationships
with multiple customers diversified across verticals such as
automotive, industrial, and railways, which limit the impact of
downturn associated with a particular vertical. The stock's
outperformance was led by continued strong operating results driven
by new customer additions across verticals and increased wallet
share within existing customers.
Cholamandalam Investment and Finance (CIFC) is a non-banking
financial company (NBFC) belonging to the Murugappa Group. It
primarily operates in vehicle finance, home equity, and affordable
home loan categories. In terms of customer profile, it caters
predominantly to single truck and small fleet owners, self-employed
non-professionals, in semi-urban and rural India. CIFC's strength
lies in its ability to reach such customers in rural and semi-urban
markets and underwrite and collect from customers with irregular
income streams. The Vehicle Finance business is in an upcycle after
a period of weak demand in the last couple of years. Apart from
briskly scaling up its housing finance business, which on a low
base could grow upwards of 25% in the coming years, CIFC has also
made progress in three new segments, namely Consumer & Small
Enterprise Loan (CSEL), Secured Business & Personal Loan (SBPL)
and SME Loan (SME). The stock outperformed as the company continued
to deliver sector leading return ratios despite being in the
investment phase for the new lines of business.
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 outperformed on the back of continued strong business
performance.
Detractors
Infosys is India's second-largest IT services company. It has a
strong global presence, including the key markets of North America
and Europe and a high-quality customer portfolio. Banking and
Financial Services (BFSI) is the largest vertical, contributing
approximately 30% of overall revenues. It operates across seven
major verticals (or revenue generating segments catering toa
particular industry): (a) banking, financial services and
insurance; (b) retail and Consumer Packaged Goods ("CPG"); (c)
communications; (d) energy and utilities; (e) manufacturing; (f)
hi-tech; and (g) life sciences. The company expects strong demand
in retail banking, commercial banking, payments and wealth
management segments leading to robust growth demonstrated by better
win rates and a healthy deal pipeline over multiple years. However,
the near-term global slowdown and aggressive cuts to discretionary
tech spending by some corporations have led to relatively weak
quarterly results for Infosys. Muted results and a moderate 4-7%
growth projection for FY24 led to the stock's underperformance.
Tatva Chintan Pharma ("Tatva") is a specialty chemical
manufacturing company which is a pioneer in processes such as
conventional synthesis, electrolysis and developing continuous flow
chemistry and generating higher efficiencies. It is the second
largest manufacturer of SDAs for Zeolites globally and the largest
commercial supplier in India, the largest producer of electrolyte
salts for super capacitor batteries in India, the largest producer
of Glymes in India and the third largest in the world. The stock
underperformed due to the global semi-conductor shortage for most
of 2022, resulting in muted demand for Tatva's products from the
auto industry. It has since shown signs of recovery. Tatva has also
recently expanded its capacity so that it can cater for higher
demand going forward.
Shaily Engineering Plastics ("Shaily") manufactures precision
injection moulded plastic components, sub-assemblies, moulds, and
dies for various original equipment manufacturers. It is one of
India's leading exporters of plastics components. Its plastics can
be found worldwide covering a diverse range of products like
medical devices, homewares, and automotive components. The stock
underperformed due to headwinds to growth in its Furnishing and
Toys segments, as a result of the adverse macro conditions both in
the US and Europe. However, it was partially offset by an improved
margin profile in the healthcare segment. Shaily is structurally
moving towards higher margin precision injection moulded plastic
components with their own technology which should drive performance
going forward.
INVESTMENT OUTLOOK
India's economy delivered solid, above expectation GDP growth of
7.2% for the fiscal year to March 2023. Its healthy
macro-fundamentals, resilient corporate earnings as well as
promising growth prospects - garnered strong foreign and domestic
investment against a global back drop of geopolitical tensions,
higher commodity prices and credit costs, as well as fears of a
recession in the US and Europe.
To take inflation, India recorded an average CPI of 6.7% for the
year to 30 June 2023 compared to 7.4% and 8.8% in the US and EU,
respectively. The government's focus on a capital expenditure push
as opposed to a loose consumption stimulus (which was relatively
lower during the pandemic, leading to increased availability of
labour as the pandemic subsided) has kept India's inflation at
manageable levels. For the current fiscal year, India's inflation
is likely to be around 5.5% as global growth slows, keeping
commodity prices benign. Moderating inflation will help contain the
government's fiscal deficit through lower subsidies, providing room
for the Reserve Bank of India to avoid raising policy rates, and
help support the margins of Indian based corporations. India's
external sector position is also likely to improve in FY24. The
Current Account Deficit ("CAD") as a percentage of GDP is likely to
be recorded at 1.5% in FY24 (compared to 2% in FY23). This coupled
with healthy capital flows should ensure that India's Balance of
Payments remains positive. Additionaly, India's healthy foreign
exchange reserve, which stands at US$607 billion results in one of
the lowest debt-to-GDP
(19%) positions globally, and provides comfort against any
potential global macro volatility.
India's economy is experiencing the start of a growth phase as
ingredients for a revival in the investment cycle seem to be in
place. The twin balance sheet problem (overleveraged corporate
balance sheets and high non-performing assets ("NPAs") of banks)
which held back private investments in the last decade seem to be
behind us. Corporate debt is at its lowest in many years and banks
are enjoying one of the lowest bad-loans ratios in the last decade
(gross and net bank NPA ratios stand at 3.9% and 1% respectively).
This provides a conducive environment for private sector capex to
pick up from here.
Government capex has also grown at a brisk pace recently,
reflecting policy commitment to building infrastructure and
facilitating private investment. The FY24 budget signalled
continuity on public capex (roads, railways and housing), enhancing
the ease of doing business and boosting exports and manufacturing.
Given this is a pre-election year, public sector capex growth is
likely to remain robust. As estimated by various global agencies,
such as the IMF and the World Bank, India is likely to emerge as
the fastest growing major economy over this decade.
The pandemic and geopolitical tensions over the last few years
have accelerated supply chain diversification across various
industries. India's favourable demographics, with 900 million
people of working age, makes it an attractive destination for
companies to set up their production base. The production linked
incentives issued by the government since 2020, for setting up new
manufacturing units producing and exporting from India, have
started to show results. A number of global giants are in the
process of starting production in India. Despite the strong growth
in the export of electronics, India's global share in many other
sectors such as chemicals and engineering goods is still small
(approximately 2% to 4%). Even a 1% to 2% incremental market share
gain from China, could result in high-teens growth rates for these
sectors.
India's well diversified corporate sector continues to generate
stable earnings growth. Earnings growth for the Nifty is projected
to grow by mid-teens over the near term, marking the best phase of
corporate profitability since the period 2003 to 2007. Despite
periodicallyrising concerns over the impact of higher credit or raw
material costs on the broader market, we believe several of our
portfolio companies are market leaders and have managed
inflationary scenarios fairly well. The underlying trend of market
share consolidation in favour of stronger, well-run businesses
continues. The unbranded (or unorganised) segment of the market has
found it challenging to deal with higher input costs and frequent
supply chain disruptions. Also, in the context of potentially
slowing global growth, it is worth re- iterating that India's
earnings have generally been more resilient than its emerging
market peers during previous downcycles.
In view of these positives, the broader Indian equity market has
seen a recovery rally since April 2023 and valuations are back to
23x (FY24 P/E multiple), as compared to the 10 year average of 19x
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 Trust's FY24 P/E
multiple would be 36.2x as opposed to 45.5x 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 potential risk perspective, general elections
in India are likely to be held in April or May 2024. Although the
current Prime Minister's popularity remains intact, and the risk of
regime change appears low, such an event or a weak coalition
government could be a negative surprise for the market. The markets
would like to see policy continuity. 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
6 October 2023
Top Ten Holdings
As at 30 June 2023 Sector % of net
assets
ICICI Bank Limited Financials 14,728,344 6.3
Cholamandalam Investment and Finance Company Limited Financials 10,842,348 4.7
Kaynes Technology India Information Technology 7,677,216 3.3
Titan Company Limited Consumer Discretionary 7,616,073 3.3
Avalon Technologies Limited Information Technology 7,471,660 3.2
Coforge Information Technology 6,595,653 2.8
Nestlé India Limited Consumer Staples 6,364,571 2.7
Maruti Suzuki India Limited Consumer Discretionary 6,316,440 2.7
HDFC Bank Limited Financials 5,802,955 2.5
Tega Industries Ltd Industrials 5,361,168 2.3
Top ten holdings 33.9
Other holdings 67.9
Total holdings 101.8
Capital gains tax provisions plus cash and other
assets/liabilities -1.8
Total net assets 100.0
Investment Policy, Results and Key Performance Indicators
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 approximately 50 to 100 investments
although, in order to allow the Investment Manager and Investment
Adviser flexibility to take advantage of opportunities as they
arise, the portfolio may occasionally comprise holdings outside of
this range.
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 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 period 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
GBP128,000 (30 June 2022: revenue surplus of GBP6,000). The Company
made a capital surplus after tax of GBP34,452,000 (30 June 2022:
capital surplus of GBP9,218,000). Therefore, the total surplus
after tax for the Company was GBP34,580,000 (30 June 2022: surplus
of GBP9,224,000).
The Board is proposing that no dividend be paid in respect of
the year ended 30 June 2023 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 Index (in sterling). 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 2023 were 18.3% and 19.4% (30 June
2022: 9.6% and 7.7%)
respectively compared to a total return of 11.8% (30 June 2022:
7.2%) for the MSCI India IMI Index (sterling).
The Chairman's statement, which can be found above, incorporates
a review of the highlights during the year. The Investment
Manager's Report, which can be found 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
The 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 1.4% on 30 June 2023
(30 June 2022: premium of 0.5%).
(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 2023, the Company's ongoing charges figure calculated in
accordance with the AIC methodology was 0.5% (30 June 2022:
0.5%).
Risk and Risk Management
Principal and emerging risks and uncertainties
Description Mitigation
Economic and market conditions
Changes in general economic and market conditions in The Investment Adviser has a proven and extensive
India including, for example, interest track record with a focus on good corporate
rates, cost increase, rates of inflation, industry governance and will monitor the position and report
conditions, competition, political events regularly to the Board on market developments.
and trends, tax laws, national and international
conflicts and other factors could substantially India is to a degree protected from global economic
and adversely affect the Company's prospects. downdrafts and increases in world inflation
as it is a relatively closed economy and not as
Weak economic and market conditions in Europe and the US vulnerable to high and rising energy prices
may lead to foreign disinvestment as in the past. Whilst not immune from disrupted
in Indian equities (the "flight to quality"). 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 Advisor has a proven and extensive
track record and, together with the broker
has an active and regular dialogue with Shareholders.
----------------------------------------------------------
Sectoral diversification
Concentration of investments in any one sector may result The Company's investment policy states that no single
in greater volatility in the value holding will represent more than 15%
of the Company's investments and consequently its NAV and of the Company's Gross Assets and no more than 40% of
may materially and adversely affect Gross Assets will be invested in any
the performance of the Company and returns to single sector (calculated at the time of investment).
Shareholders.
The investment policy allows approximately 50 to 100
stocks 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 Index (in sterling). 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) Each of these contracts were entered into after full and
The Board has contractually delegated to external proper consideration of the quality
agencies the management of the investment and cost of services offered, including the financial
portfolio, the custodial services (which include the control systems in operation in so far
safeguarding of the assets), the registration as they relate to the affairs of the Company. All of the
services and the accounting and company secretarial above services are subject to ongoing
services. oversight of the Board and the performance of the
principal service providers is reviewed
The main risk areas arising from the above contracts on a regular basis. The Board monitors key personnel
relate to allocation of the Company's risks as part of its oversight of the
assets by the Investment Manager, and the performance of Investment Manager. The Company's key service providers
administrative company secretarial, report periodically to the Board on
registration and custodial services. These could lead to their control procedures including those in respect of
various consequences including the cyber security risks.
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 inability to make investment decisions.
----------------------------------------------------------
Regulatory risks
Breaches of Section 1158 of the Corporation Tax Act could The Company has contracted out relevant services to
result in loss of investment trust appropriately qualified professionals.
status. Loss of investment trust status would lead to the The Investment Manager and the Company Secretary report
Company being subject to tax on on regulatory matters to the Board
any gains on the disposal of its investments. Breaches of on a quarterly basis. The assessment of regulatory risks
the Financial Conduct Authority forms part of the Board's risk assessment
("FCA")'s rules applicable to listed entities could programme.
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.
----------------------------------------------------------
Financial risks
The Company's investment activities expose it to a The investment policy states that while the Company
variety of financial risks which include retains the flexibility to do so, it is
foreign currency risk and interest rate risk. 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 In making investment decisions, the Investment Manager
The Company could suffer as a result of increased considers qualitative measures, such
investor demand for products which promote as the environmental and social impact of a company as
ESG investments. well as financial and operational measures.
Climate change leads to additional costs and risks for
portfolio companies. The Company's ESG Policy, found in the printed accounts.
It 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 The Investment Manager takes such risks into account,
operations of individual investee companies, along with the downside risk to any
potential investee companies, their supply chains, and company (whether in the form of its business prospects,
their customers. 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.
Whilst India witnessed extreme weather events during the
year under review, most notably flooding
across Northern India, the Company's portfolio is
diversified across regions and sectors that
are considered less vulnerable to the impact of such
extreme weather events. The impact of
extreme weather events are considered as part of the
investment decision- making process by
the Investment Adviser.
----------------------------------------------------------
Potential reputational damage from non-compliance with The Board has adopted a policy of fostering high
regulations or incorrect disclosures 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") disclosure, 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 on the The Company does not have any direct or indirect
Company's portfolio of investments and any exposure to investments in Ukraine or Russia.
future prolonged and deep market decline which would There are also no direct business relationships with
likely lead to falling values in the counterparties from these countries.
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.
----------------------------------------------------------
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the financial statements 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 financial reporting standards in conformity
with the requirements of the Companies Act 2006, 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
6 October 2023
FINANCIAL STATEMENTS
Statement of Comprehensive Income
For the financial year ended 30 June 2023
For the year ended For the year ended
30 June 2023 30 June 2022
---- ----------------------------- -------------------------------
Revenue Capital Total Revenue Capital Total
---- ------- --------- --------- --------- --------- ---------
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---- ------- --------- --------- --------- --------- ---------
Gains on investments 4 - 43,805 43,805 - 7,848 7,848
---- ------- --------- --------- --------- --------- ---------
Gains/(losses) on currency movements - 330 330 - (309) (309)
---- ------- --------- --------- --------- --------- ---------
Net investment gains - 44,135 44,135 - 7,539 7,539
---- ------- --------- --------- --------- --------- ---------
Income 5 1,308 - 1,308 1,040 - 1,040
---- ------- --------- --------- --------- --------- ---------
Total income 1,308 44,135 45,443 1,040 7,539 8,579
---- ------- --------- --------- --------- --------- ---------
Performance fees 7 - (2,464) (2,464) - - -
---- ------- --------- --------- --------- --------- ---------
Operating expenses 8 (1,041) - (1,041) (832) - (832)
---- ------- --------- --------- --------- --------- ---------
Operating profit before taxation 267 41,671 41,938 208 7,539 7,747
---- ------- --------- --------- --------- --------- ---------
Taxation 9 (139) (7,219) (7,358) (202) 1,679 1,477
---- ------- --------- --------- --------- --------- ---------
Profit for the year 128 34,452 34,580 6 9,218 9,224
------- --------- --------- --------- --------- ---------
Earnings per Ordinary Share 10 0.14p 38.51p 38.65p 0.01p 9.46p 9.47p
---- ------- --------- --------- --------- --------- ---------
There is no other comprehensive income and therefore the 'Profit
for the year' is the total comprehensive income for the year ended
30 June 2023.
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
As at 30 June 2023
30 June 30 June
Note 2023 2022
GBP'000 GBP'000
Non-current assets
Investments held at fair value through profit
or loss 4 236,764 183,361
------ --------- ---------
Current assets
--------- ---------
Cash and cash equivalents 6,489 7,027
--------- ---------
Dividend receivable 229 188
--------- ---------
Other receivables 225 42
--------- ---------
6,943 7,257
--------- ---------
Total assets 243,707 190,618
--------- ---------
Current liabilities
------ --------- ---------
Purchases for future settlement (459) -
------ --------- ---------
Other payables 6 (520) (203)
------ --------- ---------
Performance fees payable 7 (2,464) -
------ --------- ---------
Non-Current liabilities
------ --------- ---------
Capital gains tax provision (7,713) (3,029)
------ --------- ---------
Total liabilities (11,156) (3,232)
--------- ---------
Net assets 232,551 187,386
--------- ---------
Equity
------ --------- ---------
Share capital 12 1,128 1,076
------ --------- ---------
Share premium account 101,003 90,470
------ --------- ---------
Special distributable reserve 13 44,276 44,276
------ --------- ---------
Capital reserve 86,136 51,684
------ --------- ---------
Revenue reserve 8 (120)
------ --------- ---------
Total equity 232,551 187,386
--------- ---------
Net asset value per Ordinary Share 14 206.2p 174.2p
------ --------- ---------
Approved by the Board of Directors on 6 October 2023 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 2023
Share Special
premium distributable Capital Revenue
Share Capital account reserve reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---- ------------- --------- -------------- --------- --------- ---------
Opening balance as at 1,076 90,470 44,276 51,684 (120) 187,386
---- ------------- --------- -------------- --------- --------- ---------
1 July 2022
---- ------------- --------- -------------- --------- --------- ---------
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
------------- --------- -------------- --------- --------- ---------
For the financial year ended 30 June 2022
Share Special
premium distributable Capital Revenue
Share Capital account reserve reserve reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---- ------------- -------- -------------- --------- --------- -------
Opening balance as at 860 49,099 44,276 42,466 (126) 136,575
---- ------------- -------- -------------- --------- --------- -------
1 July 2021
---- ------------- -------- -------------- --------- --------- -------
Profit for the year - - - 9,218 6 9,224
---- ------------- -------- -------------- --------- --------- -------
Issue of Ordinary Shares 12 216 41,886 - - - 42,102
---- ------------- -------- -------------- --------- --------- -------
Share issue costs - (515) - - - (515)
---- ------------- -------- -------------- --------- --------- -------
Closing balance as at 30 June
2022 1,128 1,076 90,470 44,276 51,684 (120)
------------- -------- -------------- --------- --------- -------
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
For the financial year ended 30 June 2023
For the year For the year
ended ended
Note 30 June 2023 30 June 2022
GBP'000 GBP'000
--------------------- ---------------------
Cash flows from operating activities
--------------------- ---------------------
Operating profit before taxation 41,938 7,747
--------------------- ---------------------
Taxation paid (3,362) (3,123)
--------------------- ---------------------
(Increase)/decrease in receivables (224) 433
--------------------- ---------------------
Increase in payables 2,781 117
--------------------- ---------------------
Gains on investments 4 (43,805) (7,848)
--------------------- ---------------------
Net cash flow used in operating activities (2,672) (2,674)
--------------------- ---------------------
Cash flows from investing activities
--------------------- ---------------------
Purchase of investments (120,344) (118,600)
--------------------- ---------------------
Sale of investments 111,893 87,259
--------------------- ---------------------
Net cash flow used in investing activities (8,451) (31,341)
--------------------- ---------------------
Cash flows from financing activities
--------------------- ---------------------
Net proceeds from issue of shares 12 10,735 34,110
--------------------- ---------------------
Share issue costs (150) (515)
--------------------- ---------------------
Net cash flow from financing activities 10,585 33,595
--------------------- ---------------------
Decrease in cash and cash equivalents (538) (420)
--------------------- ---------------------
Cash and cash equivalents at start of year 7,027 7,447
--------------------- ---------------------
Cash and cash equivalents at end of year 6,489 7,027
--------------------- ---------------------
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 2022 to 30 June 2023.
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 2024. As such the
Directors have adopted the going concern basis in preparing the
financial statements.
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 ongoing
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 2023 of
GBP7,713,000 (30 June 2022: GBP3,029,000) 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 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 accruals basis. Expenses
are recognised through the Statement of Comprehensive Income as
revenue items except that performance fees, if any, are payable
directly by reference to the capital performance of the Company as
per the Investment Management Agreement and are therefore charged
to the Statement of Comprehensive Income as a capital item. No
other management fees are payable.
(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 accruals
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 are expected to 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
In January 2020, the IASB issued amendments to paragraphs 69 to
76 of 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 2023.
Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which
it introduces a definition of 'accounting estimates'. The
amendments are effective for annual reporting periods beginning on
or after 1 January 2023.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS
Practice Statement 2 Making Materiality Judgements. The amendments
to IAS 1 are applicable for annual periods beginning on or after 1
January 2023.
4. Investments held at fair value through profit or loss
(a) Investments held at fair value through profit or loss
As at As at
30 June 30 June 2022
2023 GBP'000
GBP'000
Quoted investments in India 233,303 177,998
------------------------------------ ---------------------
Unquoted investments in India 3,461 5,363
------------------------------------ ---------------------
Closing valuation 236,764 183,361
------------------------------------ ---------------------
(b) Movements in valuation
As at
30 June As at
2023 30 June 2022
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 120,803 121,568
----------------------- --------------
Disposals, at cost (95,065) (68,544)
----------------------- --------------
Closing book cost 180,040 154,302
----------------------- --------------
Revaluation of investments 56,724 29,059
----------------------- --------------
Closing valuation 236,764 183,361
----------------------- --------------
Transaction costs on investment purchases for the year ended 30
June 2023 amounted to GBP163,000 (30 June 2022:
GBP159,000) and on investment sales for the financial year to 30
June 2023 amounted to GBP181,000 (30 June 2022:
GBP172,000). As at year end GBP2.3 million (30 June 2022:
GBP11.6 million) of investments were subject to lock in
periods.
(c) Gains on investments
Year ended
30 June Year ended 30
2023 June 2022
GBP'000 GBP'000
Realised gains on disposal of investments 16,484 25,241
---------------- ----------------
Transaction costs (344) (331)
---------------- ----------------
Movement in unrealised gains/(losses) on investments
held 27,665 (17,062)
---------------- ----------------
Total gains on investments 43,805 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.
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 2023 As at 30 June 2022
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
------- ------- ------- ------- ------- ------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- ------- ------- ------- ------- -------
Investments at fair value through 233,303 - - 233,303 177,998 - - 177,998
------- ------- ------- ------- ------- ------- ------- -------
profit and loss - Quoted investments
------- ------- ------- ------- ------- ------- ------- -------
in India
------- ------- ------- ------- ------- ------- ------- -------
Unquoted investments in India - - 3,461 3,461 - - 5,363 5,363
------- ------- ------- ------- ------- ------- ------- -------
233,303 - 3,461 236,764 177,998 - 5,363 183,361
------- ------- ------- ------- ------- ------- ------- -------
As at
30 June As at
2023 30 June 2022
GBP'000 GBP'000
Opening balance 5,363 6,323
---------------- --------------
Additions during the year 1,199 5,416
---------------- --------------
Conversion from level 3 to level 1 investments (2,916) (6,353)
---------------- --------------
Total losses for the year recognised in profit or loss (185) (23)
---------------- --------------
Closing balance 3,461 5,363
---------------- --------------
As at year end, the Company had two unquoted investments. These
are investment in Ideaforge Technology Ltd for a total of 178,464
shares and investment in Veeda Clinical Research Ltd for a total of
680,790 shares.
As at the end of prior year, investment in Bikaji Foods
International Limited was classified as Level 3 investment as there
is no available market price. During the year, the investment has
entered into an Initial Public Offering and has been classified as
Level 1 Investment.
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"), which will replace the 2018 Valuation Guidelines.
The revised Guidelines are effective for periods beginning from 1
January 2023, with early adoption encouraged. The guidelines are
consistent with IFRS. The Investment Manager applies techniques
consistent with the IPEV. 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
As at
30 June As at
2023 30 June 2022
GBP'000 GBP'000
Income from investments:
----------------------- --------------
Overseas dividends 1,307 1,040
----------------------- --------------
Other Income:
----------------------- --------------
Deposit interest 1 -
----------------------- --------------
Total income 1,308 1,040
----------------------- --------------
6. Other payables
As at
30 June As at
2023 30 June 2022
GBP'000 GBP'000
Accrued expenses 520 203
------------------ --------------
Total other payables 520 203
------------------ --------------
7. Performance fees expense
Year ended 30 June Year ended 30 June
2023 2022
Revenue Capital Total Revenue Capital Total
------- ------- ------- ------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- ------- ------- -------
Performance fees expenses - 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 Index in the medium term. The performance fee will be
measured over periods of three years (Performance Period), with the
first period ending (approximately three years from 6 July 2018) on
30 June 2021. 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 30 June 2023, there was a GBP2,464,000 provision for the
performance fee liability to the Investment Manager for the full
two year period (30 June 2022: nil, for the one year period).
8. Expenses
Year ended
30 June Year ended
2023 30 June 2022
GBP'000 GBP'000
Administration & secretarial fees 197 158
----------------- ---------------
Auditor's remuneration - Statutory audit fee* 67 45
----------------- ---------------
Broker fees 32 33
----------------- ---------------
Custody services 40 30
----------------- ---------------
Directors' fees and expenses 128 128
----------------- ---------------
Board trip to India costs 31 17
----------------- ---------------
Tax compliance and advice 30 27
----------------- ---------------
Printing and public relations 202 192
----------------- ---------------
Marketing fees** 84 -
----------------- ---------------
Registrar fees 24 18
----------------- ---------------
Legal Fees 92 90
----------------- ---------------
UKLA and other regulatory fees 16 10
----------------- ---------------
Other expenses*** 98 84
----------------- ---------------
Total 1,041 832
----------------- ---------------
* Auditor's remuneration excludes VAT.
** The Company has incurred marketing fees during the period.
*** 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 Year ended 30 June
2023 2022
Revenue Capital Revenue Capital Revenue Capital
------- ------- ------- ------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- ------- ------- -------
Capital gains tax provision - 4,684 4,684 98 1,369 1,467
------- ------- ------- ------- ------- -------
Capital gains tax expense/(credit) - 2,535 2,535 - (3,048) (3,048)
------- ------- ------- ------- ------- -------
Indian withholding tax 139 - 139 104 - 104
------- ------- ------- ------- ------- -------
Total tax charge for the year 139 7,219 7,358 202 (1,679) (1,477)
------- ------- ------- ------- ------- -------
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 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 Year ended
30 June 30 June 2022
2023 GBP'000
GBP'000
Operating profit before taxation 41,938 7,747
--------------------- --------------
UK Corporation tax at 20.5% (2022: 19%) 8,597 1,472
--------------------- --------------
Effects of:
--------------------- --------------
Indian capital gains tax provision 7,219 (1,679)
--------------------- --------------
Gains on investments not taxable (9,048) (1,432)
--------------------- --------------
Overseas dividends not taxable (268) (198)
--------------------- --------------
Unutilised management expenses 719 158
--------------------- --------------
Indian withholding tax 139 202
--------------------- --------------
Total tax charge for the year 7,358 (1,477)
--------------------- --------------
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 GBP3,465,000
(2022: GBP2,589,000) based on the prospective UK corporation tax
rate of 25% (2022: 25%). This asset has accumulated because
deductible expenses exceeded taxable income for the year ended 30
June 2023. 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.
(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 2023, the Company made a capital gains tax provision
of GBP7,713,000 (30 June 2022: GBP3,029,000) in respect of
unrealised gains on investments held.
10. Earnings per Ordinary Share
Year ended 30 June 2023 Year ended 30 June 2022
Revenue Capital Total Revenue Capital Total
--------- -------- ------ --------- -------- ------
Profit for the year (GBP'000) 128 34,452 34,580 6 9,218 9,224
--------- -------- ------ --------- -------- ------
Earnings per Ordinary Share 0.14p 38.51p 38.65p 0.01p 9.46p 9.47p
--------- -------- ------ --------- -------- ------
Ea
Earnings per Ordinary Share is based on the profit for the year
of GBP34,580,000 (30 June 2022: profit of GBP9,224,000)
attributable to the weighted average number of Ordinary Shares in
issue during the year ended 30 June 2023 of 89,469,919 (30 June
2022: 97,433,268). Revenue and capital profits are GBP128,000 (30
June 2022: revenue profit of GBP6,000) and GBP34,452,000 (30 June
2022: capital profit of GBP9,218,000) 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 2023 in accordance with the
Company's Dividend policy shown above.
12. Share capital
As at
30 June
2023 As at
No. of 30 June 2022
shares GBP'000 No. of shares GBP'000
Allotted, issued and fully paid: Redeemable
Ordinary Shares of 1p each ("Ordinary Shares") 112,807,812 1,128 107,567,672 1,076
---------------------------------------- --------- ----------------------- ---------
Total 112,807,812 1,128 107,567,672 1,076
---------------------------------------- --------- ----------------------- ---------
Ordinary Shares
On incorporation, the issued share capital of the Company was 1
Ordinary Share of GBP0.01.
During the year ended 30 June 2023, 5,240,140 Ordinary Shares
(30 June 2022: 22,590,042) were issued with aggregate proceeds of
GBP10,735,000 (30 June 2022: GBP42,102,000). Additionally, 124,374
Ordinary Shares were matched with buyers in the market in respect
of the 30 September 2022 annual Redemption Point. As at the date of
this Annual Report, the total number of Ordinary Shares in issue is
112,807,812 (30 June 2022: 107,567,672).
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.
Since year end and up to 4 October 2023, being the latest
practical date prior to the signing of these financial statements,
5,707,135 Ordinary Shares were issued with aggregate proceeds of
GBP12,534,144.
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/distribution payments.
14. Net asset value ("NAV") per Ordinary Share
Net assets per ordinary share as at 30 June 2023 of GBP206.2p
(30 June 2022: GBP174.2p) is calculated based on GBP232,551,000 (30
June 2022: GBP187,386,000) of net assets of the Company
attributable to the 112,807,812 (30 June 2022: 107,567,672)
Ordinary Shares in issue as at 30 June 2023.
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 in the Strategic
report.
The Company's financial assets and liabilities comprised:
As at 30 June 2023 As at 30 June 2022
Interest Non-interest Interest Non-interest
bearing bearing Total bearing bearing Total
-------- ------------ ------- -------- ------------ -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------ ------- -------- ------------ -------
Investments - 236,764 236,764 - 183,361 183,361
-------- ------------ ------- -------- ------------ -------
Total investment - 236,764 236,764 - 183,361 183,361
-------- ------------ ------- -------- ------------ -------
Cash and cash equivalent - 6,489 6,489 - 7,027 7,027
-------- ------------ ------- -------- ------------ -------
Short-term debtors - 454 454 - 230 230
-------- ------------ ------- -------- ------------ -------
Short-term creditors - (3,443) (3,443) - (203) (203)
-------- ------------ ------- -------- ------------ -------
Other assets - 3,500 3,500 - 7,054 7,054
-------- ------------ ------- -------- ------------ -------
Total financial assets - 240,264 240,264 - 190,415 190,415
-------- ------------ ------- -------- ------------ -------
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
GBP23,676,000 (30 June 2022: GBP18,336,000) in the investments held
at fair value through profit or loss at the year end, which is
equivalent to 10.20% (30 June 2022: 9.8%) of 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 note 15.
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 2023
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 Fair value of Key variable Variable input Positive impact Nagative impact
Technique investments input sensitivity (GBP'000) (GBP'000)
(GBP'000) (%)
Expected future
cash flows
Weighted average and equity 10% change in
of the discount discount
following: 2,304 rate/WACC; rates 3,285 1,878
------------------ ----------------- ------------------ ------------------ ------------------
1. Discounted Selection of
Cash Flow Index used;
(DCF); and
------------------ ----------------- ------------------ ------------------ ------------------
2. Market Selection of
movement based comparable
valuation companies based
based on on peer
Index; and group.
------------------ ----------------- ------------------ ------------------ ------------------
3. Market
movement based
valuation
based on Peer
Group.
------------------ ----------------- ------------------ ------------------ ------------------
B. ideaForge Technology Limited
Valuation Fair value of Key variable Variable input Positive impact Nagative impact
Technique investments input sensitivity (GBP'000) (GBP'000)
(GBP'000) (%)
Subscription 1,157 N/A N/A N/A N/A
price at 23
June 2023
------------------ ------------------ ------------------ ------------------ ------------------
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
14.2%.
Selection of Index used
The selection of index is assessed based on the market
comparable index to the Company. MSCI India IMI and S&P BSE 500
were used for the market movement-based valuation based on
index.
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 2023 30 June 2022
% %
Within one to seven days 83.9 88.8
----- -------------
Between seven days to one month 11.2 4.7
----- -------------
Between one and three months 1.6 1.1
----- -------------
Greater than three months 3.3 5.4
----- -------------
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 2023 As at 30 June 2022
Investment Net monetary Total currency Investment Net monetary Total currency
exposure exposure exposure exposure exposure exposure
---------- ------------ -------------- ---------- ------------ --------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------ -------------- ---------- ------------ --------------
Indian rupees 230,513 5,377 235,890 177,785 4,138 181,923
---------- ------------ -------------- ---------- ------------ --------------
Swedish Krona 561 - 561 1,788 - 1,788
---------- ------------ -------------- ---------- ------------ --------------
US Dollar 5,690 347 6,037 3,788 28 3,816
---------- ------------ -------------- ---------- ------------ --------------
Total investment 236,764 5,724 242,488 183,361 4,166 187,527
---------- ------------ -------------- ---------- ------------ --------------
Based on the financial assets and liabilities at 30 June 2023,
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 2023 would have been an
increase/(decrease) in fair value as follows:
30 June 2023 30 June 2022
Increase Decrease Increase Decrease
in in in in
---------- ---------- ---------- ----------
Fair Value Fair Value Fair Value Fair Value
---------- ---------- ---------- ----------
GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ----------
Indian rupees 23,051 (23,051) 17,778 (17,778)
---------- ---------- ---------- ----------
Swedish Krona 56 (56) 179 (179)
---------- ---------- ---------- ----------
US Dollar 569 (569) 379 (379)
---------- ---------- ---------- ----------
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 2023, the Depository held GBP233,303,000 (30 June
2022: GBP177,998,000) in respect of quoted investments and
GBP6,489,000 (30 June 2022: GBP7,027,000 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 GBP1
each, and reserves totalling GBP232,551,000 (30 June 2022:
GBP187,386,000).
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.
Since commencement of operations on 6 July 2018 fees were
payable at an annual rate of GBP35,000 to the Chairman, GBP27,500
to the Chair of the Audit Committee, and GBP25,000 to the other
Directors. From 1 July 2021 fees were payable at an annual rate of
GBP40,000 to the Chairman, GBP32,500 to the Chair of the Audit
Committee, and GBP27,500 to the other Directors.
The Directors had the following shareholdings in the Company,
all of which are beneficially owned.
As at As at 30 June As at 30 June
date 2023 2022
of this
report
Andrew Watkins 94,425 94,425 94,425
------------------------------------------ ------------- -------------
Jamie Skinner 95,985 94,200 84,733
------------------------------------------ ------------- -------------
Rita Dhut 81,733 81,733 81,733
------------------------------------------ ------------- -------------
Dr Jerome Booth 80,213 77,623 66,202
------------------------------------------ ------------- -------------
17. Post balance sheet events
As announced on 5 September 2023, the total number of Ordinary
Shares in respect of redemption requests were received for this
Redemption Point was 547,339. All of which were immediately placed
with buyers by the Company's corporate broker. The NAV per share of
the Company has increased by 9.7% from 30 June 2023 to 4 October
2023, being the latest practical date prior to the signing of these
accounts.
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 2023, 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 2023 was approved
on 6 October 2023. 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 8 December
2023 at 12 noon.
Company Secretary and registered office:
Apex Listed Companies Services (UK) Limited
6th Floor, 125 London Wall, Barbican, London EC2Y 5AS, United
Kingdom
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END
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