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LONDON (Alliance News) - India Capital Growth Fund Ltd Thursday said the underperformance of its portfolio against the BSE Mid Cap index in 2014 shouldn't be seen as a sign of weakness, as it reported that the net asset value total return of the fund rose 59.8% on an undiluted basis in 2014.
The increase in the NAV total return was accompanied by an increase of 70% in the company's share price, resulting in the discount to NAV narrowing to 14% at the end of the year.
India Capital Growth Fund's performance measured up on the wrong side of the 63.2% total return for the company's notional index, the BSE Mid Cap, but compared favourably with the MSCI India index's 28.7% total return.
"Whilst the portfolio marginally underperformed the BSE Mid Cap index in 2014, this should not be judged as evidence of poor performance, far from it. The index does not represent a group of investible companies as per the manager's investment process, principally because of the varied quality, underlying poor liquidity and constantly changing nature of its constituents," Chairman Fred Carr said in a statement.
"As a gauge of success one should rather focus on the substantial out performance of the company's NAV to all the major equity indices in India, as well as our immediate competition, and the broader investment trust universe across global markets and sectors," Carr added.
The chairman was confident about the outlook for the company over the coming year, with investment manager Ocean Dial Asset Management eyeing further investment opportunities in India.
According to Carr, such opportunities could arise from "lower interest rates, a renewed investment cycle, and a continued recovery in foreign sentiment".
Carr also said the company could call for an option that would allow it to increase its share capital by 50% to be exercised sooner than might have been.
The issue is based on when shareholders exercise subscription shares that were issued at 61 pence per share. Although the official exercise period isn't due to kick in until August 2016, Carr said that August 2015 could be the first opportunity the company has to increase its share capital.
Carr said that the company "may decide to call for an earlier exercise of the subscription shares prior to their official expiry, in order to increase the size of the company's assets at an opportune time to further invest into Indian equities".
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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