An urgent video message from the chairman, Elisabeth Scott
A message from the Chairman from India Capital on Vimeo.
Additionally:
- Join one of their two webinars;
- Read our research note India Capital Growth – Needs more time;
- And David Cornell, of the manager Ocean Dial will be on our weekly show Friday at 11am (normally only open to professional investors) which all investors can join this week;
Proposal details
India Capital Growth will hold an extraordinary general meeting on 12 June 2020, in Guernsey, where shareholders will be asked whether they want the fund to continue.
The board undertakes a performance assessment every three years and a vote on the trust’s continued existence is put to shareholders only in the event that either of the following criteria are met:
- the company’s monthly average market capitalisation million over the past year is below £30m; or
- the company’s published diluted NAV per ordinary share has underperformed the benchmark by more than a cumulative 5% over the previous three years.
While the first of these criteria has been satisfied, IGC’s performance is very unlikely to improve sufficiently to meet the second threshold by 6 August 2020 (the date for the next three yearly assessment). Diluted NAV per share fell 45.8% from 7 August 2017 to 15 May 2020, representing a cumulative underperformance against the benchmark (BSE Mid Cap Total Return Index) of 14.1%.
The board has therefore decided to bring forward the date for proposing the continuation resolution and its proposals.
In order for IGC to have a future, the board recognises that the following parameters must be satisfied:
- performance will need to improve significantly;
- the level of the discount must be brought in significantly;
- a pathway to liquidity must be provided to investors; and
- costs must be competitive.
The board believes there is potential for IGC’s performance to improve significantly and is proposing the company continues. To this end, the board has put forward the following, to redress the underperformance, subject to the passing of continuation resolution:
- the introduction of a redemption facility, giving shareholders the right to request the redemption of part or all of their shareholding on 31 December 2021, and every second year thereafter, at an exit discount equal to a maximum of a 6% discount to NAV per redemption share;
- a change to the investment manager’s fee from 1.25% of total assets per annum, to the lower of 1.25% of average market capitalisation (calculated on a daily basis) per annum or 1.25% of total assets per annum with effect from 1 July 2020 (which gives the manager an incentive to narrow the discount) with a further review to the investment manager’s fee in 2022; and
- IGC may seek to satisfy redemption requests by matching such requests with demand for new ordinary shares from incoming investors.
If the resolution is not passed, proposals to wind-up, reorganise or reconstruct the company, will be put to shareholders. Given the extremely volatile market environment and the as yet unknown impact of COVID-19 on India, the board considers that the realisation of the company’s portfolio of investments at the present time is likely to result in sub-optimal returns for shareholders.
Elisabeth Scott, chairman of India Capital Growth Fund, said:
“The company has significantly underperformed its benchmark, India’s BSE Mid Cap Total Return Index, in the recent past. This is disappointing and means the company is likely to fail the second part of its three-yearly assessment in August, triggering a continuation vote, details of which are set out below. As a result, the board has been carefully assessing, in the interest of shareholders, the best options for the future of the company.”
“The choice is between winding up the company at a time when Indian mid-cap and small-cap equities are trading at close to their 15-year lows; or taking strong measures to improve performance and provide shareholders with a way to redeem the bulk of their holdings, if they wish, at a set date in the future.”
“The board has weighed both options and is now putting before shareholders its proposed way forward. These include extensive measures to improve performance, a redemption offer at the end of 2021 and a cut in the fee the company pays to the investment manager, Ocean Dial. Below, and in more detail in the circular being dispatched today, is information on the proposals.”
“The directors consider this way forward is in the best interests of the company and shareholders. If you wish India Capital Growth Fund to continue you should vote in favour of these proposals at the EGM on 12 June, with proxy votes needing to be lodged by 10 June. The directors unanimously recommend you do this.”