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The strategy was launched in November 2006 and transitioned to the Sustainable Funds Group in 2008. The strategy invests in companies based in or having significant operations in India, Pakistan, Sri Lanka or Bangladesh and which are positioned to benefit from and contribute to sustainable development.
1 April - 30 June 2021
During the course of this quarter, we initiated two new positions in Cholamandalam Financial Holdings and Blue Dart Express in the strategy.
Cholamandalam Financial Holdings owns a 45% stake in Chola Finance, an NBFC (Non-Banking Financial Company) we have previously owned in this strategy, and a 60% stake in Chola MS General Insurance. The business is 49% owned by the Murugappa family, who have a century-long history of conservative growth in India. We have watched the family evolve over the past decades, and built comfort in their stewardship and improving capital allocation. We are encouraged to see the management changes in the insurance business, and a growing focus on underwriting profits. In an insurance market as underpenetrated as India is, a conservative insurer keen to grow profitably with the Murugappa heritage behind them is well set up to continue taking market share.
Our second new position this quarter, Blue Dart Express, is the Indian express logistics subsidiary of the Deutsche Post Group who continue to own 75% of the business. Average tenure of senior managers within the business is 15 years, with the current CEO having been with Blue Dart for over 35 years. These managers have built the leading express franchise within the country, consistently reinvesting behind expanding the reach of their network. In the face of multiple rounds of price-based competition, they have also demonstrated the ability to remain focused on their core strengths of quality and speed, enabling them to retain their strong competitive position. We believe Blue Dart remains well situated to continue benefiting from the tailwinds around improved logistics and connectivity within India.
We also continued to add to businesses like CG Power and Bosch India, that stand to benefit from sustainable tailwinds around industrial growth and improved penetration of electric vehicles. Both businesses are managed by competent stewards, with long runways for structural growth. Bosch, the only listed subsidiary of the international group, is owned ultimately by a foundation which gives them the benefit of a time horizon measured in decades rather than quarters. This has allowed them to make early investments into electrification across automotives. Similarly, CG Power’s electric motors are essential in sustainable infrastructure across the country. Emerging from bankruptcy under its previous owners, the company is now well set up to focus in on profitable growth under their new stewards, Tube Investments, which is also a large holding in the strategy and a Murugappa company.
We decided to exit our position in SKF India, a maker of ball bearings for automotive and industrial end uses, choosing instead to add to what we believe to be higher quality industrials, mentioned above. While SKF India remains a well-managed company, we believe the others have better opportunities for growth in the decade ahead.
1 April - 30 June 2021
Indian Subcontinent Sustainability
During the quarter there were 53 resolutions from nine companies to vote on. On behalf of clients, we did not vote against any resolutions.
View our list of investment terms to help you understand the terminology within this document.
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