Ian Cowie: my first 10-bagger will now pay dividends

England beat India in a dramatic final day of the first Test at Headingley this week, but the financial fact remains that cricket is a much bigger business on the subcontinent than it is here. We may have invented the game but cannot rival the Board of Control for Cricket in India (BCCI) revenues of nearly $1.2 billion (£880 million) last year.

Similarly, India’s gross domestic product (GDP) overtook the United Kingdom’s four years ago, to replace us as the fourth-biggest economy on this planet, according to the International Monetary Fund (IMF). Since then, the UK has slipped to sixth place behind the US, China, Germany, India and Japan.

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Never mind the big-picture macroeconomics. When this small shareholder began writing about investing in India nearly 30 years ago, some readers questioned why anyone would bother.

Cheap cynicism is an easy way to impress the credulous, but I think I won that one when JPMorgan Indian Ord (LSE:JII) became my very first 10-bagger years ago. Shares in what had been Fleming Indian, which I bought for 63p in June 1996, traded at £10.66 this week.

Here and now, there are good reasons to hope there might be more to come. Subject to a shareholders’ vote on 8 July, this £796 million investment trust intends to buy back up to 30% of its shares and, more importantly for this long-term shareholder who has no intention of selling any, to begin paying dividend income equal to 4% of its net asset value (NAV).

If approved, that would make JII the first Indian investment trust to pay any income, which is an important consideration for many baby boomers like me, whose thoughts turn increasingly frequently to funding an enjoyable life after work. Mr Market seems pretty keen, too, shrinking JII’s discount to NAV from a 12-month average of -16% to less than -9% this week.

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A spokesperson for the trust told me: “Dividends will be paid by way of four equal interim dividends in December, March, June and September each year. The board believes that the introduction of an enhanced distribution policy, which will be financed through a combination of any available net income in each financial year and other reserves, utilises the investment structure and will differentiate the company among its peers.”

I’m also encouraged to see that half the aforementioned board of directors have more money invested in this investment trust than it pays them in annual fees.

As a financial journalist who likes to put my money where my mouth is, it’s always good to see directors with “skin in the game”. According to analysis by Investec Securities, JII’s newish chair Jeremy Whitley, who was appointed in February last year, has nearly £196,000 invested in this fund, while senior independent director Vanessa Donegan holds stock worth almost £80,000. Those holdings are, respectively, more than four times and double their annual fees.

Against all that, it’s only fair to ‘fess up that JII’s performance has been dire for most of the past decade.  

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That’s why I began buying shares in India Capital Growth Ord (LSE:IGC), which focuses on smaller and medium-sized companies on the subcontinent, paying £1.21 in September 2021. They were trading at £1.75 this week, having delivered total returns over the usual three periods of 194%, 212% and -5% respectively.

More fundamentally, while US President Donald Trump has damaged confidence in world trade with his tariff threats and other antics, he’s also weakened the US dollar, which should help emerging markets whose debts are primarily denominated in that currency.

On a purely personal level, I’d rather invest in India than China, using just over 2% of my life savings to back the world’s biggest democracy over its biggest dictatorship.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in India Capital Growth (IGC) and JPMorgan Indian (JII) as part of a globally diversified portfolio of investment trusts and other shares.