Ashoka ups private asset exposure as equity markets suffer
Ashoka India Equity (AIE ) is upping its allocation to private assets, noting that India’s structural growth story is ‘very much intact’ despite a weaker equity market.
The board of the £460m trust will seek shareholder approval to lift its cap on unquoted holdings to 15% of gross assets, from 12%, at an annual general meeting (AGM) later this year.
Its investment in private companies surged from £2.6m to £32.3m over the 12 months to June, which was spread across six private holdings.
Over this time, AIE’s net asset value total return fell 0.2%, ahead of the MSCI India benchmark, which was down 6.6%.
Savvy stock selection drove the relatively strong returns, led by OneSource Specialty Pharma, Bharti Airtel and Cholamandalam Financial Holdings.
On the downside, Vanrun Beverages, one of Pepsi’s largest bottlers, and Grindwell Norton, the abrasives, ceramics and plastics provider, suffered slower than expected growth. Tata Consultancy Services (TCS) also underperformed amid a generally ‘challenging macro environment with demand uncertainty in North America.’
The trust exited all utilities holdings during the year, increasing exposure to small caps, industrials and healthcare. The portfolio expanded from 126 to 158 stocks.
This number has since risen to 163, according to Panmure Liberum analyst Callum Stokeld.
‘It is interesting to see the deepening of the number of holdings within the portfolio, given the headline valuations in the index and index performance in recent months,’ he said.
‘It is reassuring, given the rapid turnaround in market conditions and evolving economic and geopolitical conditions, to see continued portfolio activity as the managers adjust to a changing backdrop.’
Commenting on President Trump’s announcement of 50% tariffs on the country over the summer, managers Hiren Dasani, Ayush Abhijeet and Prashant Khamka shared hopes the levies represent ‘an opening salvo in a trade negotiation process and ultimately could settle down at more reasonable levels, in line with those applied to other trading partners.’
Regardless, they added that India is a domestically driven economy, with exports to the US representing just 2% of the country’s GDP. Electronics and pharma exports for now exempt from any hikes.
The team maintains that India is ‘at the cusp of realising its true economic potential’ with ‘young demographics, superior corporate profitability and megatrends of digitalisation and formalisation’ emerging as the structural drivers of the still ‘relatively under-researched’ India growth story.
They highlighted that ‘amid tariff-related uncertainty, India’s strong macroeconomic fundamentals have been reinforced by S&P’s recent upgrade of India’s sovereign credit rating from ‘BBB-‘ to ‘BBB’... attributed to improved fiscal management, strong economic growth, and stable monetary policy.’
Responding to demand, the trust issued 14.8m new shares over the year, raising a total of £42.2m.
This will be the first year Ashoka pays a dividend (0.5p per share) to comply with rules governing its investment trust status, having generated a revenue ‘almost by default’ owing to the excess of cash distributed by its holdings.
The board is unsure whether this will become an annual event.
Over the last five years, AIE’s NAV has risen 167.8% against the index’s 123.6% jump and since launch in July 2018, assets have grown from £46m to £450m, leading to its inclusion in the FTSE 250 index in June.
Peel Hunt’s Anthony Leatham said: ‘Whilst the recent imposition of US tariffs on India has introduced uncertainty, structural reforms and manufacturing incentives have put India in a strong position for sustained growth.
‘AIE continues to be the top-performing trust in the Indian equity sector and currently trades around par, in line with its 12-month share price rating.’
