abrdn New India Investment Trust (ANII) has reported robust annual results for the year ended 31 March 2025, with the trust delivering an adjusted NAV total return of 11.7%, significantly outperforming its benchmark, the MSCI India Index, which returned just 0.7% over the same period. The share price rose by 16.0%, narrowing the discount from 20.4% to 15.0%, and to 8.4% by mid-June 2025. This marks the second consecutive year of recovery following a challenging 2021–22 period. The company’s long-term performance remains strong, with five- and ten-year NAV total returns of 116.6% and 131.1%, respectively.
Portfolio withstands correction
The trust’s managers, James Thom and Rita Tahilramani of abrdn Asia Limited, highlighted the strength of the portfolio in navigating a turbulent second half of the financial year, which saw a broader correction in Indian equities. This was driven by both domestic and global headwinds – including weaker consumer demand and the disruptive impact of Donald Trump’s re-election and his new wave of US tariffs.
The largest contributions to returns came from holdings in energy, financials, communications services, and consumer discretionary sectors. Notably, non-benchmark small- and mid-cap (SMID) stocks like Aegis Logistics and KFin Technologies were standout performers, alongside core large-cap holdings such as ICICI Bank and Bharti Airtel.
The managers also pointed to the outperformance of Indian Hotels, Mahindra & Mahindra, and selective healthcare and telecom names. Governance concerns continued to keep Reliance Industries out of the portfolio – a decision that added to performance as the index heavyweight lagged.
Fee cut and buybacks
A reduction in management fees has been agreed, with the investment fee now based on market capitalisation rather than NAV. From 1 April 2025, fees will be charged at 0.8% on the first £300m of market cap and 0.6% on any excess, replacing the flat NAV-based charge. The change is expected to better align fees with shareholder outcomes, particularly in discounting environments.
In addition, the trust stepped up its share buyback activity, repurchasing over 4.25m shares (8.2% of share capital) during the year and another 1.4m shares post year-end. The board confirmed that buybacks remain a key part of its approach to narrowing the discount and enhancing NAV. Since the start of the current financial year, the discount has narrowed further, aided by performance and marketing efforts.
Performance-related tender on track
A five-yearly conditional tender offer, introduced in 2022, will be triggered if the trust underperforms the benchmark on an adjusted NAV basis. However, after the first three years, ANII has a decent lead, having delivered 34.9% vs 27.2% for the index.
Capital gains tax continues to weigh on NAV comparisons
The trust accrues for unrealised Indian capital gains tax, currently reducing NAV by 43.6p (or 4.8%). The benchmark does not reflect this tax liability, hence the board uses an “adjusted NAV” to fairly compare relative performance and assess performance conditions.
The accrual rose marginally during the year following a tax hike in July 2024. While this continues to be a drag on reported NAV, the managers highlight that the liability only crystalises upon asset disposals and does not affect cash generation or day-to-day portfolio management.
Portfolio evolution and new holdings
The team continues to adjust the portfolio in light of evolving conditions. New holdings over the year included:
- Indian Hotels – a top-tier hospitality group benefiting from premiumisation and growth in domestic travel.
- Poly Medicure – a medical device manufacturer with high reinvestment and strong balance sheet.
- Concord Biotech – an API producer specialising in fermentation-based products.
- Brigade Enterprises – a Bangalore-based real estate company with high governance standards.
The managers have also continued to reduce exposure to more cyclical areas such as real estate and capital goods, while adding to more resilient sectors like healthcare and communications.
Gearing adjusted, new facility secured
Net gearing was reduced marginally to 3.9%, down from 4.1%, through a £6.5m paydown on the RBS loan facility. The trust has since entered into a new three-year, £30m revolving credit facility with BNP Paribas at a lower rate, giving it continued flexibility to deploy gearing tactically.
Looking ahead: macro uncertainty, long-term optimism
Looking forward, the managers acknowledge near-term risks including global economic slowdown, geopolitical flashpoints (including recent India-Pakistan tensions), and the uncertain impact of Trump’s trade agenda. However, they remain optimistic about India’s long-term prospects, highlighting six key structural growth drivers: rising consumption from a growing middle class, urbanisation and infrastructure investment, financial inclusion enabled by digital technology, healthcare growth driven by demographic shifts, a leading IT services sector, and a push toward renewables and sustainability.
On valuation, the recent pullback has brought prices to more reasonable levels, especially in the SMID cap space, which the managers believe presents selective buying opportunities for long-term investors.
[QD comment Matthew Read: abrdn New India has delivered another solid year of outperformance, building on the recovery seen in 2023. The trust’s focus on quality and a willingness to avoid companies with governance concerns (as seen with its continued exclusion of Reliance), appears to have worked to its advantage during a volatile year for Indian equities.
The move to a market cap-based fee aligns incentives more closely with shareholder outcomes, particularly given the trust’s historical discount issues, although the expanded buyback programme, improved marketing, and strong performance have all contributed to a notable narrowing of the discount – now the tightest it has been in years. While Indian equities can be volatile and macro risks remain, if this decent run of performance continues, the discount could tighten further.]
