India Capital Growth’s net asset value rose by 50.3% over the course of 2014, an impressive result but unfortunately quite a bit less than the company’s benchmark, the BSE Mid Cap Index, which returned 63.2%. The MSCI India index returned 28.75 over the same period. The Chairman makes the point that the BSE Index contains a number of companies that do not fit the investment manager’s remit for reasons of poor quality and underlying poor liquidity. Additionally, they say the constituents of the Index change frequently. Shareholders will be pleased though that the fund’s share price rose by 70.1% over the same period as the discount narrowed.
The Chairman alludes to the possibility that, under the terms of the subscription share agreement, it may be that the company calls for the early exercise of the subscription shares.
Within the portfolio, seven investments delivered returns in excess of 100%. The main contributors were Motherson Sumi Systems (“MSS”) up 152.4% (4.2% weight) and Eicher Motors up 204.6% (3.4% weight). MSS is one of the world’s largest manufacturers of rear-view mirrors and polymer components for passenger cars. Eicher Motors, a JV between Eicher and Volvo, is India’s third largest commercial vehicle manufacturer. It also owns the Royal Enfield brand which sells the iconic “Bullet” motorcycle.
The top negative contributors were Aban Offshore down 30.7% and Idea Cellular down 21.8%. Aban is an oil rig supplier to offshore exploration and production companies and its share price was negatively impacted as a result of the sharp collapse in the value of oil coupled with concerns with capex being lowered amongst its customer base. Idea Cellular is India’s fourth largest mobile phone operator in number of subscribers and third largest in terms of revenue market share. The stock corrected on the back of concerns of cashflows being hit by aggressive bidding for upcoming telephone licences for spectrum.
IGC : India Capital Growth reaps rewards of resurgent stock market