10 abrdn New India Investment Trust plc
The Company’s net asset value (“NAV”) total return was
-8.0% in sterling terms for the year ended 31 March 2023
(the “Year”) compared with a total return of -6.0% for the
MSCI India Index (the “Benchmark”).
Over what was another volatile year for equities, the
Company’s focus on long-term quality bore fruit towards
the final three months of the Year. Reiterating the
Chairman’s observations on pages 6 and 7, we are
encouraged that the focus on quality holdings and
avoiding investing in large corporate groups that fail to
meet our stringent criteria, is starting to deliver better
performance. We are focused on improving performance
and will continue to work hard to enhance returns
for shareholders.
Market and Performance review
India was actually among the most resilient markets in
what was an exceptionally turbulent year for global risk
assets. The Year was marked by rising inflation, slowing
global growth, and the ongoing Ukraine conflict. There
were also challenging moments such as banking sector
turmoil in developed markets, emanating from the US.
Despite these external headwinds, the Indian economy
continued its post-pandemic recuperation. Aided by
increasing government capital expenditure and easing
supply chain worries, the services sector gradually
improved while we witnessed a manufacturing revival.
While this was underway, inflation eased to a 16-month
low by the end of the Year to sit at 5.7%.
Looking at the portfolio’s performance over the Year, it is
perhaps best explained in two distinct periods. Between
April and December 2022, the Company’s performance
fell sharply behind the Benchmark. However, between
January and March 2023 – performance was much
improved and recouped some of the earlier losses.
Over the first period, the key reasons for the under-
performance against the Benchmark were: not holding
any of the Adani group of companies (the “Adani Group”)
in the portfolio, negative stock selection in Azure Power
Global and Piramal Enterprises, the poor returns from the
IT services stocks, and not holding Mahindra & Mahindra in
the early part of the review period. We discussed these
reasons in greater detail in the Half-Yearly Report for the
six months ended 30 September 2022 (available from
www.abrdnnewindia.co.uk) and while we had taken some
profits from our IT services holdings, our overall overweight
exposure to the sector detracted from performance
during the early part of the Year.
For the second period, as the final three months of the
Year, the recovery in performance was mainly due to the
unravelling of the Adani Group, which started in January
2023 after the publication of a highly critical report by a US
short-seller; a key event which your Chairman has made a
reference to also on page 6. We believe in investing in
businesses that are backed by reputable promoter groups
with a track record of delivering value to all shareholders.
We continue to view the Adani Group as lower quality
stocks given their weak financial track records, highly
over-leveraged balance sheets and major ESG concerns,
which make them risky bets in our view, which we have
not been prepared to expose the portfolio to. We have
always been clear about our reservations over the
transparency and accounting practices of the Adani
Group and the dramatic share-price collapse is a
vindication of our rigorous investment process that filters
out low-quality companies from the outset.
The relative contribution from the financials sector also
turned positive. The share price of PB Fintech, which
operates the online insurance platform Policybazaar,
staged a strong recovery after its results showed that it
was on track to turn profitable – in terms of its earnings
before interest, taxation, depreciation, and amortisation
(EBITDA) – in the next financial year. It was one of the high-
quality growth stocks in the portfolio whose share price
was depressed heavily in 2022 due to the rotation away
from growth to value, despite displaying healthy
fundamental characteristics.
Our holdings in core banks such as ICICI Bank and HDFC
Bank also held up better than other lenders as the banking
sector was weighed down by concerns over the collective
exposure to Adani loans. In addition, HDFC Bank’s
upcoming merger with HDFC appears to remain on track,
which we viewed as positive for the stock, and our
exposure to it.
These holdings were also buoyed by better credit growth,
higher interest rates and good asset quality.
Our industrial capex and infrastructure-related holdings
also contributed to better relative performance. ABB
India’s strong portfolio of products and services benefited
from the recovering capex cycle. The company also plans
to invest US$121 million (approximately £97 million) over
the next five years to expand its capacity to meet growing
demand. Power Grid Corporation of India, which benefits
from the country’s need to invest in power infrastructure,
outperformed after delivering good results. UltraTech
Cement performed well, as the company ramped up
capacity, driven by strong demand from infrastructure
and housing and rising private sector capex.
Investment Mana
er’s Review