India Capital Growth (IGC), the £93m fund focused on small and mid-cap Indian stocks, yesterday gained over 97% shareholder votes approving the introduction of a dividend and a reduction in the exit opportunities given to investors.
The investment company will now pay a semi-annual dividend starting at a level of around 2% of net asset value, said chair Elisabeth Scott.
IGC will also hold a conditional tender offer every five years if it underperforms its new benchmark, the MSCI India index, allowing shareholders to sell up to a quarter of their shares at close to net asset value.
This replaces the two-yearly redemption windows that in the past four years have shrunk the closed-end fund by more than £76m, including £31m of withdrawals in December.
Scott hoped the conditional tender offer would relieve some of the pressure on fund manager Gaurav Narain as he looks to take advantage of better value in the Indian stock market after a “disappointing” 2025 following strong returns in the previous two years.
Although Indian equities rose by almost 10% in local currency as the government continued to make significant economic reforms and cemented the country as a global digital and technology hub, the rupee fell against the pound as investors worried about the impact of US tariffs, volatile oil prices and conflict with Pakistan, knocking the portfolio into a 10.4% decline in sterling.
As a result IGC underperformed “by a small margin” its previous benchmark, the BSE Midcap Total Return index. Scott told shareholders: “Despite the difficult environment, there were a number of bright spots with the company’s exposure to the financial sector contributing positively to performance and large foreign investors are beginning to see value in the sector. Sadly, the positives were outweighed by the negative drag of tariffs on export-related companies.”
Over five years, IGC shareholders have received a total return of 50.2% compared to the 28.5% average of its small sector of four London-listed India funds.
Our view
James Carthew, head of investment company research at QuotedData, said: “I was really pleased to see yesterday’s announcement that India Capital Growth’s shareholders got behind the board’s proposals to introduce a dividend and make its exit opportunities less frequent (we explained the rationale for this in our 25 February note). Today’s annual results reflect the recent weakness in the Indian market, which has been worsened since the year end by the jump in energy prices. Despite this bump in the road, the long-term outlook for the fast-growing Indian businesses that IGC owns is undiminished, and now they are trading on more reasonable valuations.”
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