Half-year Report

RNS Number : 9713J

India Capital Growth Fund Limited

15 September 2016

 

15 September 2016

INDIA CAPITAL GROWTH FUND LIMITED

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

	30 June 2016	30 Dec   2015	% change
Per Ordinary Share
Net Asset Value (NAV) - undiluted	94.48p	80.64p	+17.2%
Net Asset Value (NAV) - diluted	83.32p	74.09p	+12.5%
Market share price	64.00p	61.00p	+4.9%
Discount to diluted NAV	23.2%	17.7%
Performance against notional benchmark
Change in BSE Mid Cap Index (GBP)	+14.9%
Undiluted NAV performance relative to the Index	+2.3%
Diluted NAV performance relative to the Index	-2.4%
FX impact
Indian Rupee / Sterling	90.52	98.35	+8.0%

Key points:

·     Undiluted Net Asset Value, reflecting portfolio performance, increased 17.2% in the period, outperforming the notional benchmark by 2.3%

·     Share price discount to NAV reflects the overhang of Subscription Shares exercisable shortly after the period end

·     Additional £22.9m capital raised from successful Subscription Share exercise in August 2016

·     Investment strategy will continue its focus on companies with high quality management teams, cash generating businesses and strong corporate governance, supported by in-depth research provided by the Manager's Mumbai-based advisors

·     India is well on the road to delivering high quality sustainable economic growth

Enquiries:

Ocean Dial Asset Management Limited (Investment Manager)             

Robin Sellers

David Cornell                  020 7802 8900

Grant Thornton UK LLP (NOMAD)

Philip Secrett

Jen Clarke                       020 7383 5100

Numis Securities Limited (Broker)

Nathan Brown                

Hugh Jonathan                020 7260 1000

Apex Fund Services (Guernsey) Limited (Administrator)

Stephen Cuddihee          01481 706999

INDIA CAPITAL GROWTH FUND LIMITED

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

CHAIRMAN'S STATEMENT

I am delighted to report that at the half way point of 2016, most aspects of the Company's performance have been very satisfactory.

Despite Indian markets enduring a shaky start to the year in lockstep with equity volatility globally, portfolio performance has remained robust, with the net asset value per share rising 17.2%, as compared with the notional benchmark's performance of 14.9%. I have chosen to highlight the performance excluding the impact of the issuance of new shares arising from the exercise of the Company's subscription shares, as this took place after the period in question, and is therefore the best way to highlight the Manager's actual performance. For the avoidance of any confusion however, when adjusted for the dilutive impact of the new issuance, the net asset value per share rose 12.5% in the period. All numbers are quoted in Sterling, which depreciated 8.0% against the Indian currency over the period, largely on account of the UK's decision to leave the European Union, significantly enhancing the value of the underlying portfolio for UK investors. For greater detail on the underlying drivers of the portfolio's performance over the period, please refer to the Investment Manager's report.

From March onwards markets globally quickly recovered their poise, led by the Emerging countries, which many investors deemed to have been heavily oversold across all asset classes, including currencies. India participated in this rally, though somewhat lagging its peer group on a relative basis. This was principally because it remains "well owned" within many global emerging market portfolios, plus its performance had been much stronger than others in prior years. Shorter term, therefore, greater value was perceived elsewhere, notably Brazil, Russia and other countries which stood to benefit more from the recent recovery in commodity prices and oil. As I highlight later in this report, however, I am increasingly confident that the investment story is playing out as anticipated and, within an Emerging market context, India continues to offer superior investment opportunities.

So, despite India remaining on track and within that the underlying portfolio's returns even more so, the Company's share price has continued to lag the performance of the underlying assets. Thus over the period it rose just 4.9%, reflecting a widening of the discount to the net asset value from 18% to 23%, at the period end. Close followers of the Company's strategy will know that this was largely a consequence of the perceived overhang of stock arising from the potential exercise of the subscription shares. As a reminder, in August 2014 the Company issued (pre-emptively to all shareholders) subscription shares, in the ratio 1 for every 2 underlying ordinary shares, with an expiry date of August 2016. These shares recently expired "in the money" allowing investors the option to inject fresh capital into the Company, without suffering an excessively dilutive impact. In a tremendous show of support for the investment strategy and India itself, 90% of shareholders chose to exercise their rights to invest further in full. Furthermore, the balance of shares that were not taken up were quickly placed by Numis Securities with new shareholders, all of whom I am delighted to welcome onto the register.

This has been a very good result for all involved and, whilst causing some discomfort to shareholders along the way, is a thorough justification of the Board's capital raising strategy. I view this as a "win-win" situation for all involved. The additional £22.9m that has been raised allows the operating expenses to be shared across a broader base, thereby reducing the Ongoing Charges from 2.1% to around 1.9%. On that note I should also highlight the good work the Manager has done in continuing to reduce operating expenses in absolute terms. Since 2009, when it assumed control, operating expenses in absolute terms have fallen by almost 25%. In addition to operating expenses dilution, the increased size of the portfolio, currently at just over £100m, and the resulting increase in share price liquidity should attract a broader potential investor base, from those who earlier were restricted by its size. Ongoing strong investment returns should now be better reflected in share price performance. The Board expects the Manager, supported by Numis Securities, to work hard in the coming months to bring this strong performance and sound investment process to new potential investors. This is a crucial step in helping to narrow the discount.

I should also add that your Board has been encouraged by recent news emerging from India, which suggests that the investment argument remains firmly on track. The Government's reform agenda has been boosted by the passing of both the long awaited Goods and Services Bill and the Bankruptcy Law, amongst others. This not only confirms Prime Minister Modi's ability to make change happen, but also ensures significant economic benefits long into the future. It is also encouraging to hear that, politically, Modi's personal popularity remains high and the BJP's recent electoral success at the state level is facilitating the reform agenda. The country's need for a healthy monsoon following two drought years was also very pressing, and as I write the rainfall has been abundant and with good distribution (i.e. raining in the right places). Not only will this replenish reservoir levels, helping to ensure that future water requirements can be met, but will also boost rural incomes in the near term, supporting consumption and economic growth, as well as keeping a lid on inflation. Macroeconomic balances remain under control aided by lower oil and commodity prices and, to date at least, sound fiscal management. Since its election victory in 2014 the Government has worked hard to create the right architecture for macroeconomic stability and investment with much success. Although this journey is by no means complete, India is well on the road to delivering high quality sustainable economic growth.

I would like to finish with a number of thank yous. First to Vikram Kaushik, who stepped down as a Director in June following four years as a member of the Board. We not only greatly valued his knowledge and wisdom of "all things Indian", but also much enjoyed working alongside him. We wish him every success in the future. A second thank you is to our shareholders for their ongoing support. This has not only enabled the Company to grow in the shorter term, but also better secure its long-term future. Both the Board and the Manager remain focused on reciprocating your trust. I look forward to reporting back to you after the year end with what I hope will be further evidence of positive progress.

Fred Carr

Chairman

15 September 2016

INVESTMENT MANAGER'S REPORT

Introduction

Elevated volatility was the order of the day across equity markets globally in the first half of 2016, and India was no exception. But despite sharp falls at the start of the year (Main Board stocks fell 11.9%, whereas Mid Cap indices fell 14.1%), markets finished up 3.4% and 5.8% respectively (local currency terms) by June end. This sharp reversal was replicated across developed and emerging markets alike, as the primary driver of fund flows remains global macro themes. Indeed, foreign Institutions continued to be net buyers of equities, adding a further US$3bn in this period. However, although the Mid Cap stocks outperformed their larger peer group, India underperformed the broader emerging market asset class. Thus MSCI Emerging Markets rose 5% compared to MSCI India which was up 0.4% (both measured in US Dollars), as the perception of India remains affected by relative valuation and weak corporate earnings. However, during this period the net asset value (NAV) per share (undiluted) rose 17.2% in Sterling terms, outperforming the notional benchmark (S&P BSE Mid Cap Total Return index) by 2.3%. This return was greatly aided by the contribution of the Rupee which rallied by 8.0% against Sterling, principally due to the impact of "Brexit".

Despite this relative underperformance India still stands out as one of the few relevant investment destinations that continues to present an improving economic outlook. Key macro data continues to provide stability and confidence to both direct and portfolio investors. Thus GDP growth for fiscal year 2016 came in at 7.6%, a 0.4% improvement on FY15, making India amongst the fastest growing large economies, a nose ahead of China. Sustained lower oil and commodity prices have also ensured that the twin deficits (current account and fiscal) remain within the forecast, and though food price inflation has been creeping up more recently, inflation as a whole remains in check. Following a six month pause, the Reserve Bank of India (RBI) cut the headline base rate by 25bps in its April meeting, subsequent to the Government's commitment to fiscal prudence highlighted in the 2017 Federal budget, but kept rates unchanged at 6.5% in August. Future monetary policy decisions will be directed by an MPC (6 members with casting vote to the Governor) using an inflation target of 4% (tolerance of +/-2%) for the next five years.

More than sound macro data however, is the meaningful and fruitful change emanating from the Government's reformed based initiatives which is nourishing the investment story. Years '14 and '15, the BJP's first in office, witnessed focused efforts to address infrastructure bottlenecks and to revive capital spending. In 2016 the emphasis has changed to creating momentum in the legislative progress. Already several important bills have been passed since the start of the year. Amongst the most important of these are the Aadhaar Bill (targeted delivery of financial subsidies, benefits and services directly to recipients' bank accounts), the Real Estate Bill (a first for a sector which has never been regulated) and the Bankruptcy Bill (faster resolution of cases of business failures and defaults by plugging legal loopholes). These will all serve to increase transparency, eliminate corruption and strengthen the financial system effecting an easier business environment. The benefits can already be felt. Alongside the initiation of new laws, incremental changes to existing laws are also being introduced with effect. For example, the new textile policy has focused on giving tax benefits based on employment generation, rather than providing cheap credit as before. With the aim of improving connectivity, the revised civil aviation policy has incentivised airlines to operate from smaller cities by removing landing fees and lowering duties on aviation fuel. Revisions to the Foreign Direct Investment policy have been made, simplifying processes required to bring foreign capital onshore by instituting an "automatic approval process", instead of the earlier plethora of pre-approval requirements from the Government. This has eased investment conditions overnight in sectors such as defence, civil aviation, healthcare, and the media which in due course will lead to higher levels off foreign direct investment (FDI). After eight long years as the political football, the much awaited Goods & Services Tax (GST) has been approved by both houses of Parliament with expected implementation in the next 12-18 months. This dual tax system, harmonising VAT across all Indian Sates, is estimated to add 1-1.5% to GDP, simply by removing the multiplicity of taxes and enhancing productivity across multiple sectors.

A major setback over the period was the announcement that an extension to Raghuram Rajan's tenure as Governor of the Reserve Bank of India was not forthcoming. Since the "taper tantrum" of 2013, Rajan has provided incalculable stability and credibility to India's economy, as well as initiating reform across many aspects of India's financial system, particularly the public sector banks. His replacement will be Dr Urjit Patel, Rajan's protégé at the Reserve Bank. Although the loss of Rajan is a setback, the choice of successor is the best outcome for markets and a clear sign of Government pursuing stable policies. Like Rajan, Patel also brings an outstanding record, and is expected to provide the policy continuity markets always crave, though we must wait to see exactly how policy will evolve. On the subject of the banks, further anxiety remains over ongoing asset quality issues and how and when they will be resolved, though recent stellar performance suggests the market has looked through the worst. In addition the fragility of rural India, still struggling with the aftershock of successive failed monsoons, and excess capacity in the manufacturing sector as a whole, are both issues contributing to ongoing stagnation in corporate earnings. These concerns impact the market through higher valuations which will need to adjust for equities to push higher.

We do however find some comfort in the corporate results for the quarter ended June'16, recently announced. Here just two prominent areas reflecting continued weakness remain, notably exports and rural consumption growth. The outlook for rural India is no longer such an issue, as good monsoon rain to date (June-September) is eliminating water shortages. Better crop yields will lead to better incomes which in due course will filter through to incremental consumption. This, in tandem with the recent hike in wages for government employees (averaging 24%) should boost consumption in urban centres. Corporate profitability was enhanced on the back of better operating margins, as a consequence of lower input prices, and in some cases, such as cement and specific capital goods items, increased revenues were the driver of improved earnings. This is reflective of a healthier investment climate in the infrastructure sectors such as roads and railways, where the Government has been investing heavily. Amongst the public sector banks, although results remained weak, there were clear signs that the worst of the asset quality are in the past.

Barring exports focused businesses, we are clearly seeing are revival in the earnings momentum all of which bodes well for the future.

Portfolio Construction and Attribution

We continued to hold most of our existing investments in the first half with only one new stock added and two exits. We did however use the volatility to trim and add exposure in several stocks to take advantage of price movements.

During the period, one stock was added, Essel Propack (a manufacturer of laminated tubes, flexible packaging and laminated paper. The Company's products are sold to pharmaceutical, consumer products and food packaging companies in India and overseas). We exited Eicher Motors on lofty valuations and KPIT as it reached our price target.

Many stocks in the portfolio contributed to our performance, including Yes Bank (5.2% weight) up 54%, The Ramco Cements (3.5% weight) up 43%, Finolex Cables (3.2% weight) up 44%, Essel Propack (2.4% weight) up 49% and Kajaria Ceramics (4.5% weight) up 23%. Among the negative contributors were Mahindra CIE (1.7% weight) down 29%, Dewan Housing (3.7% weight) down 12% and Lupin (1.9% weight) down 16%. The outperformance stemmed mainly from stock selection in Industrials, Financials and Materials whilst negative attribution came from the underweight position in Energy and stock selection in Consumer Discretionary.

Ocean Dial Asset Management

15 September 2016

INVESTMENT POLICY

The Company's investment objective is to provide long-term capital appreciation by investing in companies based in India via its wholly-owned subsidiary. The investment policy permits the Company to make indirect investments in a range of Indian equity and equity linked securities and predominantly in listed mid and small cap Indian companies with a smaller proportion in unlisted Indian companies. Investment may also be made in large-cap listed Indian companies and in companies incorporated outside India which have significant operations or markets in India. While the principal focus is on investment in listed or unlisted equity securities or equity linked securities, the Company has the flexibility to invest in bonds (including non-investment grade bonds), convertibles and other types of securities. The Company may, for the purposes of hedging and investing, use derivative instruments such as financial futures, options and warrants. The Company may, from time to time, use borrowings to provide short-term liquidity and, if the Directors deem it prudent, for longer term purposes. The Directors intend to restrict borrowings on a longer term basis to a maximum amount equal to 25 per cent of the net assets of the Company at the time of the drawdown. It is the Company's declared policy not to hedge the exposure to the Indian Rupee.

PRINCIPAL INVESTMENTS

AS AT 30 JUNE 2016

Holding	Market cap size	Sector	Value £000	% of Company NAV
Yes Bank	L	Financials	3,669	5.18%
Kajaria Ceramics	M	Industrials	3,194	4.51%
Federal Bank	M	Financials	3,054	4.31%
Jyothy Laboratories	S	Consumer Staples	2,787	3.93%
Indusind Bank	L	Financials	2,726	3.85%
PI Industries	M	Materials	2,715	3.83%
Dish TV India	M	Consumer Discretionary	2,623	3.70%
Dewan Housing	S	Financials	2,610	3.68%
City Union	M	Financials	2,572	3.63%
The Ramco Cements	M	Materials	2,488	3.51%
Divis Laboratories	L	Healthcare	2,392	3.38%
Max Financial Services	M	Financials	2,373	3.35%
Exide Industries	M	Consumer Discretionary	2,273	3.21%
Finolex Cables	S	Industrials	2,237	3.16%
Motherson Sumi Systems	L	Consumer Discretionary	2,202	3.11%
Berger Paints India	M	Materials	2,136	3.01%
Sobha Developers	S	Financials	1,914	2.71%
Tech Mahindra	L	IT	1,754	2.47%
Essel Propack	S	Materials	1,731	2.44%
Emami	M	Consumer Staples	1,714	2.42%
Total top 20 equity investments			49,164	69.39%

 

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS TO 30 JUNE 2016

			Unaudited	Unaudited	Audited
			Six months to	Six months to	Year to
			30.06.16	30.06.15	31.12.15
	Revenue £000	Capital £000	Total £000	Total £000	Total £000
Income
Net gains on financial asset at fair value through profit or loss	-	10,461	10,461	2,733	5,073
Total income	-	10,461	10,461	2,733	5,073
Expenses
Investment management fee	77	-	77	72	-
Operating expenses	(155)	-	(155)	(144)	(285)
Foreign exchange loss	(1)	-	(1)	-	(1)
Total expenses	(79)	-	(79)	(72)	(286)
Profit for the period/year before taxation	(79)	10,461	10,382	2,661	4,787
Taxation	-	-	-	-	-
Profit for the period/year after taxation	(79)	10,461	10,382	2,661	4,787
Earnings per Ordinary Share (pence)	Note 4		13.84	3.55	6.38
Fully diluted earnings per Ordinary Share (pence)	Note 4		13.84	3.53	6.38

The total column of this statement represents the Company's condensed statement of comprehensive income, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

The profit after tax is the "total comprehensive income" as defined by IAS 1. There is no other comprehensive income as defined by IFRS and all the items in the above statement derive from continuing operations.

UNAUDITED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS TO 30 JUNE 2016

			Share Capital £000	Capital Reserve £000	Revenue Reserve £000	Share Premium £000	Total   £000
Balance as at 1 January 2016			750	(4,240)	(8,880)	72,850	60,480
Gain on investments			-	10,461	-	-	10,461
Revenue loss for the period after taxation			-	-	(79)	-	(79)
Balance as at 30 June 2016			750	6,221	(8,959)	72,850	70,862

For the six months to 30 June 2015 (unaudited)

			Share Capital £000	Capital Reserve £000	Revenue Reserve £000	Share Premium £000	Total   £000
Balance as at 1 January 2015			750	(9,313)	(8,594)	72,850	55,693
Gain on investments			-	2,733	-	-	2,733
Revenue loss for the period after taxation			-	-	(72)	-	(72)
Balance as at 30 June 2015			750	(6,580)	(8,666)	72,850	58,354

For the year ended 31 December 2015 (audited)

			Share Capital £000	Capital Reserve £000	Revenue Reserve £000	Share Premium £000	Total   £000
Balance as at 1 January 2015			750	(9,313)	(8,594)	72,850	55,693
Gain on investments			-	5,073	-	-	5,073
Revenue loss for the period after taxation			-	-	(286)	-	(286)
Balance as at 31 December 2015			750	(4,240)	(8,880)	72,850	60,480

UNAUDITED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016

			Unaudited		Unaudited		Audited
			30.06.16		30.06.15		31.12.15
	Notes		£000		£000		£000
Non-current assets
Financial asset designated at fair value through profit or loss			70,849		58,309		60,509
Current assets
Cash and cash equivalents			47		83		96
Receivables			112		92		21
			159		175		117
Current liabilities
Payables			(146)		(130)		(146)
Net current assets/(liabilities)			13		45		(29)
Total assets less current liabilities			70,862		58,354		60,480
Equity
Ordinary share capital	5		750		750		750
Reserves			70,112		57,604		59,730
Total equity			70,862		58,354		60,480
Number of Ordinary Shares in issue	5		75,001,463		75,001,463		75,001,463
Net Asset Value per Ordinary Share (pence) - Undiluted			94.48		77.80		80.64
Net Asset Value per Ordinary Share (pence) - Diluted                                                                     6			83.32		72.20		74.09

UNAUDITED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS TO 30 JUNE 2016

			Unaudited		Unaudited		Audited
			30.06.16		30.06.15		31.12.15
			£000		£000		£000
Cash flows from operating activities
Operating profit			10,382		2,661		4,787
Adjustment for:
Net gain on financial asset at fair value through profit or loss			(10,461)		(2,733)		(5,073)
Foreign exchange losses			1		-		1
Operating loss before working capital changes			(78)		(72)		(285)
Working capital changes
Increase in receivables			(91)		(84)		(13)
(Decrease)/increase in payables			-		(9)		7
Cash flow used in operating activities			(169)		(165)		(291)
Cash flows from investing activities
Sale of investments			121		200		340
Net (decrease)/increase in cash and cash equivalents during the period/year			(48)		35		49
Cash and cash equivalents at the start of the period/year			96		48		48
Foreign exchange losses			(1)		-		(1)
Cash and cash equivalents at the end of the period/year			47		83		96

NOTES

1. Accounting Policies

Basis of accounting

The unaudited interim financial statements for the six months ended 30 June 2016 have been prepared under International Financial Reporting Standards (IFRS) as adopted by the EU and interpretations adopted by the International Accounting Standards Board (IASB).

The unaudited interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's financial statements as at 31 December 2015.

Basis of preparation

The interim financial statements for the period ended 30 June 2016 have been prepared under the historical cost convention adjusted to take account of the revaluation of the Company's investments to fair value.

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies (AIC) in January 2009 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. In particular, supplementary information which analyses the statement of profit or loss and other comprehensive income between items of a revenue and capital nature has been presented alongside the statement of comprehensive income. 

Impact of IFRS 10 'Consolidated Financial Statements'

As set out under IFRS 10, a parent entity that qualifies as an investment entity should not consolidate its subsidiaries which themselves qualify as investment entities. The Company meets all the following criteria to qualify as an investment entity:-

(i)   Obtaining funds from one or more investors for the purpose of providing those investors with investment management services - the Board of Directors of the Company has delegated this function to its investment manager, Ocean Dial Asset Management Limited;

(ii)  Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both - funds are invested in ICG Q Limited for the sole purpose of achieving capital appreciation via further placements in Indian listed securities; and

(iii) Measures and evaluates the performance of substantially all of its investments on a fair value basis - on a monthly basis, the Company's investment in ICG Q Limited is revalued at the prevailing Net Asset Value at the corresponding valuation date.

(iv) The IFRS 10 Investment Entity Exemption requires investment entities to fair value all subsidiaries that are themselves investment entities. As the subsidiary meets the criteria of an investment entity, it has not been consolidated.

On the basis of the above, these financial statements represent the stand-alone figures of the Company.

Expenses

Expenses are accounted for on an accruals basis. Other expenses, including management fees, are allocated to the revenue column of the statement of comprehensive income.

Taxation

Full provision is made in the statement of comprehensive income at the relevant rate for any taxation payable in respect of the results for the period.

Investment

The Company's investment is designated at fair value through profit or loss at the time of acquisition. It is initially recognised at fair value, being the cost incurred at acquisition. Transaction costs are expensed in the statement of comprehensive income. Gains and losses arising from changes in fair value are presented in the statement of comprehensive income in the period in which they arise.

The investment is designated at fair value through profit or loss at inception because it is managed and its performance evaluated on a fair value basis in accordance with the Company's investment strategy as documented in the Admission Document and information thereon is evaluated by the management of the Company on a fair value basis.

Purchases and sales are recognised on the trade date - the date on which the Company commits to purchase or sell the investment.  

Financial assets

The financial asset is derecognised when the rights to receive cash flows from the investment have expired or the Company has transferred substantially all risks and rewards of ownership.

Receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. Due to their short-term maturities, their fair values approximate their costs.

Payables are recognised initially at fair value and subsequently measured at amortised cost. Due to their short-term maturities, their fair values approximate their costs.

Foreign currency translation

The Company's shares are denominated in Sterling and the majority of its expenses are incurred in Sterling. Accordingly, the Board has determined that the functional currency is Sterling. Sterling is also the presentation currency of the financial statements.

Monetary foreign currency assets and liabilities, including investments at fair value through profit or loss, are translated into Sterling at the rate of exchange ruling at the statement of financial position date. Investment transactions and income and expenditure items are translated at the rate of exchange ruling at the date of the transactions. Gains and losses on foreign exchange are included in the statement of comprehensive income.

Cash and cash equivalents

Cash comprises cash in hand, overdrafts and demand deposits. Cash equivalents are short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant changes in value. 

Standards, interpretations and amendments to published statements not yet effective

Certain current standards, amendments and interpretations are not relevant to the Company's operations. Equally, certain interpretations to existing standards which are not yet effective are equally not relevant to the Company's operations. At the date of the authorisation of these financial statements, the following standards and interpretations which were in issue but not yet effective have not been early adopted in these financial statements:-

Amendments to IFRS 7 and IFRS 9 - Mandatory effective date and Transition disclosures is effective for periods beginning on or after 1 January 2016.

Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39 is effective for periods beginning on or after 1 January 2018

IFRS 9 - Financial Instruments (issued in 2014) is effective for periods beginning on or after 1 January 2018

IFRS 15 - Revenue from Contracts with Customers beginning on or after 1 January 2018

IFRS 16 - Leases beginning on or after 1 January 2019

The Board has not yet assessed the impact of these standards as they have been recently published. The Directors believe that other pronouncements which are in issue but not yet operative or adopted by the Company will not have a material impact on the financial statements of the Company, but these will continue to be reviewed.

2. Significant accounting judgements, estimates and assumptions

IFRS require management to make judgments, estimates and assumptions that effect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equate to the related actual results. The main use of accounting estimates and assumptions occurs in the calculation of the sensitivity analysis.  And in relation to the valuation of unlisted investment, actual results may differ from the estimates. It is management's judgement that NAV of ICG Q Limited is an appropriate proxy for fair value as the Company can control the sale of the subsidiary's investments and therefore no liquidity discount required.

3. Operating expenses

			Unaudited Six  months to		Unaudited  Six  months to		Audited Year to
			30.06.16		30.06.15		31.12.15
			£000		£000		£000
Directors' fees			45		35		78
D&O insurance			3		3		6
Administration and secretarial fees			22		20		33
Audit fee in respect of current year			13		15		23
Audit fee in respect of prior year			-		-		8
Broker fee			13		13		25
Nomad fee			10		10		20
Registrar fee			1		9		10
Other professional fees			8		9		21
Subscription Share costs			9		-		-
General expenses			31		30		61
			155		144		285

4. Earnings per share

Earnings per Ordinary Share is calculated on the profit for the period of £10,382,000 (30.06.15 - £2,661,000) divided by the weighted average number of Ordinary Shares of 75,001,463 (30.06.15 - 75,001,463).

The fully diluted Earnings per Ordinary Share is calculated on the same profit for the period but divided by the diluted weighted average number of Ordinary Shares of 75,001,463 (30.06.15 - 75,450,937). The diluted weighted average number of shares assumes that the 37,500,710 Subscription Shares issued on 6 August 2014 will be exercised at their subscription price of 61 pence if the average market price of Ordinary Shares for the period, which was 59.65 pence (30.06.15 - 61.74), exceeds this subscription price. Consequently in accordance with IAS 33, the dilutive potential ordinary shares for the period were nil (30.06.15 - 449,474), which when added to the weighted average number of Ordinary Shares of 75,001,463 (30.06.15 - 75,001,463) gives a weighted average number of Ordinary Shares for the purposes of fully diluted Earnings per Ordinary Share of 75,001,463 (30.06.15 - 75,450,937).

The Subscription Shares had a subscription date of 6 August 2016 and have therefore been redeemed and cancelled as at the date of this report.

5. Share capital

Ordinary Share Capital of £0.01 each							Number of shares				Share capital
											£000
At 30 June 2016							75,001,463				750
At 30 June 2015							75,001,463				750

The Company's capital is represented by Ordinary Shares of par value £0.01. Each share carries one vote and is entitled to dividends when declared. The Company has no restrictions or specific capital requirements on the issue or repurchase of Ordinary Shares.

Subscription Share Capital							Number of shares				Share capital
											£000
At 30 June 2016							37,500,710				-
At 30 June 2015							37,500,710				-

On 6 August 2014, the Company undertook a bonus issue of Subscription Shares to Ordinary Shareholders on the basis of one Subscription Share for every two Ordinary Shares of £0.01 each held on 4 August 2014. The Subscription Shares were allotted to qualifying Ordinary Shareholders free of payment. Each Subscription Share conferred the right to subscribe for one Ordinary Share, at a fixed price of 61 pence on 6 August 2016. At the date of this report all Subscription Share rights were exercised and consequently the Subscription Shares have been redeemed and cancelled.

6. Diluted Net Asset Value

The diluted Net Asset Value per Ordinary Share has assumed the Subscription Shares were fully exercised at 61 pence per share, increasing the Net Assets by £22,875,000 (30.06.15 - £22,875,000) and increasing the Ordinary Shares in issue by 37,500,710 (30.06.15 - 37,500,710).

- END -

This announcement was approved by the Board on 15 September 2016. It is not the Company's interim accounts, but has been prepared on the same basis as those accounts.

The full Interim Report together with the unaudited accounts for the period is expected to be mailed to shareholders on 22 September 2016 and a copy will be posted on the Company's website www.indiacapitalgrowth.com in accordance with AIM Rule 26.

Disclaimer: Neither the content of the Company's website, nor the content of any website accessible from hyperlinks on the Company's website (or any other website), is incorporated into, or forms part of, this announcement.

 

END

 

 

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