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Results analysis: Ashoka India Equity

AIE has reported another year of strong alpha generation…
Thomas McMahon
Last update 30 September 2021

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Ashoka India Equity. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

  • Ashoka India Equity (AIE) has reported strong results for the year ending 30 June 2021. Excellent returns from the Indian market have been supplemented by significant alpha. AIE’s NAV total return was 52.6% compared to a 45.2% total return for the MSCI India IMI Index. AIE’s share price total return was 65% as the shares moved from a 5.4% discount to a 2.3% premium. As of 28/09/2021 the premium was 2.1% (Source: JPM Cazenove).

  • The managers report that while Indian GDP fell by 7.5% over FY 2021, earnings growth for the NIFTY 50 benchmark of the largest Indian stocks was the highest it has been for a decade at 14%. While India suffered a severe second wave of coronavirus infections during the period, the stock market was relatively unaffected.

  • Amongst AIE’s most successful stock picks during the period were Coforge and Infosys. Coforge is a fast growing mid-cap IT services company with a strong niche in insurance and travel technology, while Infosys is a global giant in the same industry and one of India’s largest companies.

  • While these are well-established companies, the managers report a thriving IPO scene which includes a number of early stage tech opportunities, such as recent listing Zomato, the food delivery company. Many more technology-enabled, new-age companies are expected to IPO in the coming months, and AIE’s manager is looking to find future ‘digital disruptors’.

  • AIE has a performance fee only structure i.e. it doesn’t charge any fixed management fee. Also, the performance fee is charged only once every three years. Due to exceptional performance over the past three years, the cumulative performance fee was 5.26% of the average net assets over 2021. The fee is paid in shares and NAV returns reported are net of this fee.

  • In considering the long-term outlook for the trust, the chairman reports: “As the world emerges from the worst effects of COVID-19, India’s economy is well placed to benefit with a young, adaptable workforce and market reforms that should enable it to continue a robust trend of economic growth.”

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