Research on the Company
Shore Capital Stock Brokers Ltd (previously Stockdale Securities Limited) acts as a broker and adviser and provides non-independent research for ICGF
One of the major headwinds for the global economy in general has been the decelerating growth in emerging markets. Indeed, if corporate profits are likely to grow at a similar pace then companies in developed markets which tend to have significantly higher corporate governance standardsshould trade at a premium multiple to those in emerging markets. With accelerating GDP growth, India stands out. In addition, the companies in the portfolio of India Capital Growth Fund should compound their earnings at a pace that is significantly higher than India’s nominal GDP growth, which we estimate to be c.12% per annum.
Marten & Co.
Marten & Co Ltd provides non-independent research for ICGF
With last year’s successful subscription share exercise pushing India Capital Growth (IGC)’s net assets through the £100m mark; strong performance relative to peers; and buoyant conditions in India, the focus now is on driving down IGC’s discount.
In August, India Capital Growth (IGC) saw the successful conversion of its subscription share issue, which increased net assets by 29.2% before costs. This expansion should improve liquidity in the company’s shares and lower its ongoing charges going forward. However, despite these positive developments, an improving outlook for India and superior performance relative to its immediate peers, IGC’s discount has widened both absolutely and relative to its peer group. We feel this is not justified and see a number of potential catalysts for it to narrow, particularly if IGC continues to grow and passes the £100m market cap threshold (£91.5m as at 20 October 2016).
IGC’s NAV is up 28.8% since our last note was published on 23 March 2016 (its price is up 20.1%) yet, in recent weeks, its discount has widened to 20.4%. There is no good reason why the discount should be widening, in our view.