Ashoka India Equity (AIE) has asked shareholders to overlook the “minor setback” of a 5.9% fall in net asset value after a difficult year exacerbated by high energy prices caused by the US-led war on Iran.
The £416m investment trust outperformed the MSCI India index which fell 8.5% in the 12 months to 30 June although annual results showed shareholders saw their stakes decline 10.7% due to a widening in the share price discount. The stock currently stands 10% below net asset value (NAV).
Chair Andrew Watkins acknowledged the fall in NAV was disappointing but said the 2.6% outperformance of the index showed the underlying assets run by Prashant Khemka at Acorn Asset Management were “resilient”.
Meanwhile, performance of the mid-cap focused portfolio since launch in 2018 had been strong, he said, with a 164.2% total investment return that was more than double the benchmark sterling gain of 76.1%.
More recent performance has also been good with the latest data at 6 October showing a 13% total return on net assets over three years against a flat MSCI India. The annual results showed £23.1m had so far been set aside for the manager’s performance fee, which replaces the conventional annual management charge, although there is another year in the three-year review before the final sum is decided.
The capital growth focused fund, which saw 5.5% of shares sold in its annual redemption facility last month, also generated a small amount of revenue and will pay its second annual dividend of 0.6p per share.
The trust’s best stock was TD Power Systems which shot up over 132% on strong demand from oil frackers, data centres and AI server farms for its gas turbines and engines.
The worst performer was One Source Speciality Pharma which despite having good prospects, suffered from contract delays in Canada, one of its key markets, and fell nearly 30%.
Khemka, a bottom-up stock picker, added Fractal Analytics, a leading data analytics provider, and Aye Finance, a lender of small consumer loans, but sold Angel One, a big retail broker with signs of declining growth in active clients, and Bharat Dynamics, a state-backed defence company that reported persistent delays across its key missile programmes.
He remained highly positive on the outlook saying the first quarter of the 2027 financial year had seen corporate earnings come in ahead of expectations, particularly among India’s under-researched small and mid-cap businesses where profits had grown at an annualised rate of nearly 20%.
Our view
Matthew Read, senior analyst at QuotedData, said: “While a NAV fall is never going to excite shareholders, AIE still outperformed a falling Indian market, extending an impressive record of outperformance since launch. Much of that value added has come from stock selection, particularly among mid- and smaller-sized companies, which helps make the case for taking an active approach to this vast and still relatively under-researched market.
“There are reasons to think the backdrop is becoming more helpful too. Indian equities have endured a difficult couple of years and valuations have cooled, with the market now trading below its 10-year average on a forward earnings basis. Meanwhile, corporate earnings remain resilient and the structural attractions – rising incomes, favourable demographics, digitalisation and the expansion of domestic manufacturing – remain firmly intact.”
