India Capital Growth Fund’s 2025 scorecard – a tough year, a clearer plan
India Capital Growth Fund’s 2025 result is a reminder of how powerful currency and style headwinds can be. The Net Asset Value (NAV) per share total return was -10.4%, slightly behind the notional benchmark BSE Midcap Total Return Index at -9.5%. The share price total return was -11.7%, ending the year at 170.00p versus a NAV of 187.29p, a 9.2% discount.
The biggest swing factor was foreign exchange. The Indian Rupee weakened materially against Sterling – the INR/GBP rate moved to 121.02 from 107.46 – creating a negative 12.6% impact on the Sterling NAV. In local currency terms, Indian equities rose, but UK holders felt the opposite.
New shareholder mechanics – a semi-annual dividend and a five-year performance tender
Two important changes were approved at the EGM on 25 March 2026:
- Dividend introduced – the Board will pay an annual dividend, semi-annually, initially expected to equate to approximately 2% of the prevailing NAV per share. The first interim dividend is intended to start in the 2026 financial year, with the Board aiming to increase over time if circumstances permit.
- Five-year conditional performance tender – the biennial Redemption Facility has been replaced. From 1 January 2026, if the Company’s audited NAV total return per share (before Indian capital gains tax) over five financial years is less than the change in the new benchmark, up to 25% of the share capital may be tendered at close to NAV less costs. The first potential tender would be around the 2031 AGM, referencing performance to 31 December 2030.
Why it matters: a regular dividend adds a tangible cash return, which can help narrow the discount. The five-year tender aligns capital actions with the long-term, bottom-up strategy and puts a clear performance yardstick in place for investors.
Discount control – substantial buybacks and the 2025 redemption
The Board leaned into discount management in 2025. Alongside routine buybacks of 1,521,500 shares at a cost of £2.6 million, the biennial Redemption Facility saw a further 16,967,020 shares – 20.1% of the shares in issue at 28 November 2025 – bought back to Treasury at 182.71p per share, a total cost of £31.0 million. Post year end, an additional 838,500 shares were repurchased for £1.3 million at an average price of 158.65p.
Why it matters: these actions support NAV per share and can help stabilise the discount, which averaged 8.0% across the year.
What drove performance – FX drag, small-cap wobble, and sector splits
It was a textbook “risk off” year. Large caps outperformed, mid caps lagged, and small caps lagged further. ICGF is deliberately tilted to the engine room of India – 72.2% small caps and 22.8% mid caps at year end – so that style bias hurt. In Sterling terms, the entire fall in the benchmark was attributable to currency.
Sector-wise, financials, autos and industrials were the brighter spots, helped by improving credit growth, a GST cut for autos, and capex momentum in power and data centres. IT services and consumption were weaker amid AI-related disruption concerns, competitive intensity and patchy demand.
The portfolio’s financials exposure helped. Multi Commodity Exchange of India was a standout amid surging volumes and a shift to a fixed-cost tech platform, while bank holdings including Federal Bank, RBL Bank, City Union Bank and IDFC Bank contributed. On the flip side, exporters and textiles struggled, with names such as Gokaldas Exports and Ramkrishna Forgings detracting as tariff noise and competition bit.
Portfolio today – high active share, domestically tilted, new benchmark fit
The Company runs a concentrated, bottom-up book of 34 holdings with an active share of around 90%. Financial Banks represented 18.9% of NAV, Financial Services 7.4% and Industrials 14.2%. Notable individual positions at year end included Multi Commodity Exchange of India (5.2% of NAV), Federal Bank (5.1%), RBL Bank (5.0%), Skipper (5.1%), Affle India (4.3%) and Persistent Systems (3.8%).
From 1 January 2026, the benchmark shifts to the MSCI India Small and Mid Cap Index (MSCI India SMID). That better reflects the investable universe for this mandate and should make relative performance comparisons more meaningful.
Costs, liquidity and governance notes
Ongoing charges rose slightly to 1.62% (2024: 1.58%). The balance sheet remains clean, with no structural gearing disclosed, and 75.2% of the portfolio could be liquidated within five days. Net assets at 31 December 2025 were £126.1 million across 67,322,124 shares in issue.
Subsequent event to note: on 16 March 2026 Liontrust Asset Management plc agreed to acquire River Global Holdings Ltd, the parent of the Investment Manager, subject to approvals. The investment team and process remain unchanged, and the Board supports the transaction.
Macro backdrop – not all gloom
Despite 2025’s market wobble, the Chair highlights a constructive medium-term set-up. Indian GDP growth is likely to remain in the 6-7% range, inflation is under control though food prices bear watching, and valuations that looked stretched a year ago now appear more reasonable. A late-year US-India deal scaled tariffs back to a more manageable 18% and domestic reforms, infrastructure roll-out and supply-chain diversification continue to support the outlook.
My take – the good, the bad, and what to watch
- Positives
- Dividend introduced – a welcome step for total return investors and potential support for the discount.
- Five-year performance tender – a clear alignment mechanism with the new benchmark.
- Portfolio tilt to financials and domestic demand – aligned with areas showing better momentum into 2026.
- Valuations more reasonable after a mid-cap and small-cap de-rate.
- Negatives
- Underperformance of 0.9% versus the notional benchmark in 2025.
- FX remains a wild card – the -12.6% Rupee headwind tells the story for Sterling investors.
- Ongoing charges ticked up to 1.62%.
- Watch next
- Execution of the new dividend – initially approximately 2% of NAV per share, paid semi-annually.
- Relative performance versus MSCI India SMID from 2026 onwards.
- Discount trend after sustained buybacks and the policy reset.
- Any reversal of foreign outflows into Indian equities and stabilisation in the Rupee.
Key numbers investors care about
| NAV total return (2025) | -10.4% |
| Share price total return (2025) | -11.7% |
| Benchmark – BSE Midcap TR (GBP, 2025) | -9.5% |
| NAV per share at 31 Dec 2025 | 187.29p |
| Share price at 31 Dec 2025 | 170.00p |
| Discount to NAV (year end) / average 2025 | 9.2% / 8.0% |
| FX – INR/GBP year end and impact | 121.02; negative 12.6% impact on Sterling NAV |
| Net assets | £126.1 million |
| Ongoing charges | 1.62% |
| 2025 on-market buybacks | 1,521,500 shares for £2.6 million |
| 2025 Redemption Facility | 16,967,020 shares for £31.0 million at 182.71p |
| Portfolio mix (small/mid/large) | 72.2% / 22.8% / 3.8% |
Bottom line
2025 was bruising in Sterling terms, but much of the damage was currency and style. The policy reset – dividend plus a performance-linked tender and a benchmark that matches the mandate – is a sensible package for long-term investors. If India’s earnings growth normalises and FX headwinds ease, ICGF’s domestic tilt and financials exposure should be well placed for a better showing against MSCI India SMID from here.
