InstallatorGruppen (Copenhagen:IG) — Quarterly Investor Update

0:00 Good morning, and welcome to the INDIA CAPITAL GROWTH FUND LIMITED investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Lucy Draper. Good morning.

0:32 Good morning. Thank you everyone for joining us today. Just a short recap on the fund before I pass you over to Gaurav. INDIA CAPITAL GROWTH FUND is a Guernsey based, London listed investment company, and it invests predominantly in small and mid sized listed companies in India. The investment team is split between Mumbai and London, and it's led by Gaurav Narain, who joined in 2011 and has been leading the team ever since.

0:58 The presentation will be around thirty minutes, and then we'll open to q and a. And on that note, over to you, Gaurav. Great. Thank you, everyone, and good morning. So as Lucy mentioned, I've been associated with the Indian capital markets for almost thirty years now and running the fund since 2011. So just a brief recap for those who are not too familiar about the fund. We invest only in Indian equities, and in fact, we we now have built a twenty year track record. What's really unique about the fund is that we invest in the small and mid cap segment of the market, and the investment team is based in India, which which is a is a big help. And I think the third aspect is we really focus on the long term, and that really suits our investment structure a lot because a lot of companies we won't be won't for well over five to five to ten years.

1:52 What I'd really like to structure this presentation is really give you an overview of what's really happening in India, the current environment, what's happening in the markets, and then how we how we invest in the in the fund. So to give you a a perspective on India itself, the story about India is really all about growth. And today, it is one of the fastest growing economies, and it's projected to be almost a 7,000,000,000,000 economy by 2030, actually makes it the third largest economy ahead of even Germany. But the the longer term story is what's really exciting, that it's really projected that India should be able to sustain a growth of six to 7% per annum for almost the next two decades. That really makes it almost a 25,000,000,000,000 economy by 2045.

2:44 But, really, what is driving this optimism on on the longer term growth? And I would attribute it to three factors. I think the first really is demographics. India today is the is the largest populated country in the world with 1,400,000,000 people. But what's really stands out is that it's a very young population. The median age is about 28 or 29 years with almost 60% of the population below 25 years. So So what you're really saying is that you you possibly add almost a 100,000,000 people to the workforce over the next decade. Now interestingly, the per capita income, as you see on the chart on the right, is just $2,700. What it really implies is that, you know, as the incomes grow, it really move into consumption.

3:35 And today, India already has a very large consumer base. Even if you take the mid middle class and the rich, we're talking about 500,000,000 plus people going almost to a billion people over the next five years. So that's the one of the biggest driver that India will be a domestic driven consumption story. Now even if you look at it today in the scenario, it's already fairly a large market for for me for various products. Take, say, automobiles. You'd be surprised that it's already the third largest market, but it's car penetration is just about seven and a half percent of household incomes. You take UK, it's 50%. It's still a small car market, but if you speak to any of the luxury car manufacturers, they're also India is one of the fastest growing markets.

4:21 The same with, say, a cell phones where second largest market, but largely, again, a a low price smartphones. But if you do speak with Apple, and they'll tell you that India is possibly the fastest growing market and is the fifth largest player in India today. And that actually flows into continuous investments in infrastructure itself. Today, India would have almost 50 cities with a million plus population. And what you're seeing is over this last decade, almost every infrastructure has doubled, and the scope is a lot more. Take, say, the metro networks. Today, 23 cities have metros. The first metro actually came up in Delhi, and this was in the early two thousands. And today, you'd be surprised that the size of the Delhi Metro is equivalent to the to the London tube network.

5:14 So, really, what we are seeing is, you know, this consumption infrastructure, it's a sustainable story going going forward. I think the second aspect, we'd bring the world the optimism is that the economy has already seen a very big transformation. And the key behind this is that India has actually had political stability. This is the third term of the Modi government. And what is done is in the first term, it was all about reforms, etcetera, and there's been really policy continuity. Now the focus of the last, I would say, five, seven years has been all about development. And where you've seen that is on the infrastructure side where over the last five years, the infrastructure spend by the government has almost trebled, and this increase is sustaining.

6:00 Also, lot of policy measures announced to bring in manufacturing, encourage the capital corporate sector to to set up capacities largely through a lot of in incentive schemes. So that's, I think, a big change that we've actually a lot of the infrastructure bottlenecks have already been addressed, and the process continues. But I think the third and most important change that's happened in the economy is is technology. The digital revolution has really accelerated India's growth story. I would say India today is possibly one of the best digital public infrastructures. What's different about India is versus, say, the Western world is that the public infrastructure digital infrastructure is actually owned by the government. And the three pillars to it. I think the first is what happened in 2015 itself when the government created a digital identity for every individual.

6:54 And this today is used as a KYC for for any any company doing an authentication. And linked to this, the government was able to have banks open almost 500,000,000 accounts to a section of society which was unbankable because of low income levels. It was prohibitively expensive for banks to open such accounts. With this KYC, it became very easy. And today, you have almost every household linked to the bank account. And to add to that, India is possibly the g cheapest data, data, network in in in the world. So with this in place, the government's actually launched a host of applications on top of that, which has been because it's government owned very large volumes, very low cost.

7:39 For example, you have your own payment gateway called UPI. This is really a zero cost transfer of real time funds across any network, across banks. And today, 45% of global transactions, real time transactions happen in India. So everyone from a a vegetable vendor on a cart will have a QR code, and everything's done on the phone. You just scan it and and money's transferred. What it's really done is it's bridged the gap between rural India and urban India, and simply because the cost of administrating these services is very low. For the government itself, a lot of efficiencies have happened. To give an example, all transfers in terms of benefits, etcetera, subsidies from the government go straight into bank accounts of recipients. So virtually, there's zero wastage, no leakages.

8:32 So that's, I would say, the third leg of this whole transformation that India suddenly become a an economy where you have the if the rich and poor divide has been bridged, and India has become a very data rich country. So having said that, what is the current environment on on on the growth side of it? What we've actually seen is post COVID, the economy was seeing GDP growth of almost 9% per annum over the last four years, and that growth has actually come off. And this growth has actually also translated into earnings growth of corporates where the period post COVID average annual earnings growth of of the index was almost 20% plus.

9:18 So both GDP and earnings growth in the last years actually actually come off, And this has actually caught people, by to some extent by surprise. Initially, was expected to the year to be slightly slow because we had, central government elections in in May last year. And, typically, when elections happen, a lot of the government spending comes to a halt prior two, three months prior to the elections and even two, three months after it. So it was expected, you know, you'll have one or two quarters of weakness, and then things will pick up again. But that didn't happen. And I would say, there was one a bit of a self inflicted wound because the central bank, was very worried that the credit growth is just too strong and and deposits are not playing catch up. Growth was trending at 15% plus on the credit side.

10:07 So they really squeezed liquidity out of the system. They wanted to bring down growth. They, thought about a lot of regulatory changes to prevent growth in, you know, unsecured lending, etcetera. So that added to some of the wars, and consumption also came off a bit, especially in rural areas because of high high food inflation. But that was expected to reverse towards the beginning of this year, which actually has not happened. And the reason I would attribute is largely to the uncertainty created by geopolitics. In India's case, you know, it started with a mini war with with Pakistan followed by, you know, the Iran Israel conflict, which really hit the entire supply chain because of that, and finally, the Trump Trump tariffs.

10:55 So we've actually seen a period of of continued slowdown with GDP coming down to about six and a half percent last year. But the government has really done a huge number of measures to kick start growth. I think for them, getting growth back on track is the primary objective, and various measures have already taken place. So in the budget, which happened in February, they slashed income tax rates, personal income tax rates to boost consumption. Even on the infrastructure spending, again, it was given a big boost. And in the first half of the year, we've already seen a 30% growth in infrastructure spending. At the monetary policy level, the spread central bank reversed all the liquidity tightening measures.

11:42 Moreover, they actually reduced interest rate by almost a 100 basis points, which caught by everyone by surprise because people were looking at a more calibrated fall. But more recently and as as this week itself, the government has really absolutely rationalized the entire indirect tax network. You've actually cut indirect taxes very sharply. It's called the goods and services tax. So what they've done is you had four rates of taxes, indirect taxes. It was 5%, 12%, 18%, and 28%. They've taken out the 2812% slab. So premium products or other what the government call luxury item like automobiles, air conditioners, refrigerators, etcetera, have seen their taxes come down from 28% to 18%.

12:32 And most products in the 1212% range has seen taxes come down to 5%. So what's it's it's done is suddenly you've seen everything price big price corrections of almost seven to 8% across almost most product categories. And this is coming at a time when the festival season is just starting. So the whole idea is that, you know, you're gonna really kick start the consumption cycle with price reductions across the board. So really, that's what's happened. Now if you really look at what's happening on the growth, what we've actually seen is post elections, the GDP growth has actually started picking up. If you see the slide on top, this is the quarterly GDP growth, and it actually bottomed out at at 5.6% in the September quarter last year. And since then, it's steadily been moving up. What's happened is while GDP growth has picked up, it's not yet translated into corporate earnings growth.

13:30 But the positive is that on the corporate earnings side also, the downgrades have stopped. And, you know, today, you're in a scenario where you actually the last quarter, you saw no downgrade, but one was really expecting upgrades. And my sense is with these latest round of indirect tax cuts, you'll likely see earnings being revised upwards. So to really sum up, I would say there are three legs to our the India growth story. The first is infrastructure, which is still doing very well. The second is corporate CapEx, and this has been weak. But if you see the chart below, the projects already announced, which are due for the next five years, by corporate India is almost two x of what it was over the previous five years.

14:15 So the pipeline is very strong. A lot of this is not hitting the ground because of the global uncertainty, and it's really a matter of time before that also you start seeing corporate CapEx move up. And the third leg of the growth is consumption, which given all the measures which have been announced, I think it's it's just a matter of time when we see a big jump in jump in consumption. The festival we see that just started as of yesterday, And what we hear posted the cut companies like Maruti, the largest automobile company, just said that there are 80,000 inquiries in that day one itself. They delivered 35,000 vehicles yesterday. So, really, what we are sensing is almost at a 20 to 30% growth across the board in most product categories based on information coming out right now.

15:07 Having said that, just some thoughts on on what's happening on the Trump tariff. This is where I think India has really got caught off guard. It was widely anticipated that India would be the one of the biggest gainers out of the Trump tariffs because relations with Trump was was between Modi and Trump was very strong, and he was projected to be one of the first companies countries to sign a free trade agreement with with The US. But what's really happened is India's with the highest tariff country amongst a lot. Moreover, I think Trump seems to single out India in terms of talking about the sort of what's happening in India. So from a point of where we thought we'd be a beneficiary, you actually hit hard.

15:57 So for India, though it's largely a domestic focused economy, America is still the largest trading partner on the on the export side. Having said that, I think I would say a number of critical items which are for The US have actually been kept out of the ambit of these tariffs. For example, pharmaceuticals, 40% of all generic products sold in The US is sourced from India, and that's kept out of out of that tariff ambit. Same with electronic manufacturing's manufacturing. If you look at the iPhone sold in The US, 100% of phones sold of iPhones sold in The US are made in India. So that's also been kept out of the tariff and bit. So effectively, I would say 50 to 60% of products get impacted.

16:48 But the two key sectors which hit the most, textiles, you know, aquaculture, gems, jewelry, a very labor intensive sector. So from an India's perspective, this is where a lot of, employment is. So it's fairly critical that, something is is is sorted out. Now when we speak with companies, what they are really telling us that it's a matter of time before it gets reversed. There's still a lot of interaction with the government, and the feel as they give us is that the government has not come up with any measures to to cushion the blow to these sectors simply because they feel that it's a matter of time when when these tariffs get reversed. So there's no point of coming up with a scheme when it's anyway gonna get reversed.

17:36 But I would say this is a big overhang which has also dampened sentiments in in corporate India. Having said that, if you look at the macros of the country, all very healthy. The fiscal deficit has been steadily coming down since COVID. Inflation today is at all time lows. Forex reserves have been steady at about $700,000,000,000, which is equivalent to about eleven months. Import cover and even the current account deficit has structurally come come down simply because, you know, the share of things like IT services, exports itself is equivalent to oil imports. So structurally, I would say the macros are still very healthy.

18:21 It's really now all about growth. And to really sum up where we are, I would say, it could only seen a bit of weakness in growth. A lot of measures have have been put in place, and I would say it's a matter of time now that the growth starts accelerating once once again. Coming to the markets, if I go back to December last year, this chart looked very different. India was the best performing markets even on a three year perspective. In this last year, India has actually been the worst performing. It's been a big underperformer. What we've really seen is that the markets have consolidated after three strong years. We've had a, what, year, 0% return year. But given the fact that, virtually, all other markets have have run up, India has been a big, underperformer.

19:13 So what is done is even the three year, returns, while it still looks very fairly strong, but it's really got dented from what it was was six months back. Now we had expected 2025 into a slightly weak weaker year, and one of the big reasons was the valuation. If you see the chart on the right, India is among the most expensive market on valuations. And what we'd anticipated was it'd be a weak year and let the earnings earnings play catch up. What we've seen is that while markets have been consolidating and have not had a had no returns, we've actually seen earnings downgrades as well. So for what I would say over the last year, the earnings have been cut by almost 10 to 12%, the estimates.

20:02 So the valuations have actually not come off, and India still looks, from almost from every parameter, expensive on the absolute side. The change that's happened is if you see this chart on the left, this is a chart showing the premium of the Indian market over other emerging markets. That's the MSCI India index over MSCI emerging market index. Now this had also shot up. Historically, India used to pay the $60.70 percent premium, which went up all the way to almost a 120% premium. That has normalized once again. And the reason behind it is simply that the emerging markets have run up. So at least on a relative basis, India is normalized, but absolute, it's still a market which when I speak with most investors overseas, all of them say that, you know, India is is expensive.

20:55 And with earnings growth weakening, it's you know, why should we invest here? But having said that, I thought I'll address one big change that's happening in the Indian equity markets. It's no longer being driven by foreign institutional investors. In In fact, fact, if you see the chart on the left, these are fund flows into the Indian equity markets. The blue columns are flows into domestic institutional investors, predominantly the mutual funds, and the gray bar is investment by the foreign institutional investors. And what you see is that over since 2021, FIRs have actually not invested in India at all. In fact, it's a negative 8,000,000,000. And this year itself, they've pulled out almost $15,000,000,000.

21:43 In contrast, domestic funds have seen inflows of almost $200,000,000,000 in in these four and a half years. And this year itself, you've seen almost $60,000,000,000 of net inflows from domestic investors. What that's done is that the ownership of foreign investors in the Indian equity market is at record lows. It's just 16%. A decade back, it was closer to 21%. So really, it's the domestics which are driving markets. And despite the big pullout from foreigners, it's become a very liquid market. Why is this happening? And this, again, goes back to the digital revolution I was talking about.

22:28 But today, what we are seeing is a lot of retail investors from smaller towns investing in in in in mutual funds through systematic investment plans. So, really, these are every month from the salary is the investing $20.25 to £30 through a systematic plan in one of the mutual fund schemes. And this is being done simply because of technology that it becomes so easy to invest in equities versus the earlier idea of investing only in gold, real estate, or in fixed deposits. And the the chart here is really showing you monthly inflows into mutual funds. And what was a billion dollars a month of inflows today is actually trending at closer to 3.5 and to $4,000,000,000 a month.

23:17 And this is very sustainable because these are very small ticket sizes. And when we speak with mutual funds, most say that you don't even need to market schemes now because it's become such a habit amongst investors to put a part of their salary in into into funds. What that has done is it's it's created a lot of equity, but what it's also done is it's created a very, very vibrant capital markets. Today, I would say a lot of capital is being raised. In fact, a third of

23:48 all IPOs globally are happening in India. And it's not just IPOs. A lot of listed companies are raising capital through qualified institutional placements. What we're also seeing is some promoters because of high valuations actually diluting the stake and they're raising capital. In fact, recently, we've seen global players for the first time diluting the stakes in the Indian arms simply because they're getting such a great valuation, and they're using the funds to

24:21 delegate at their home markets. So it's a very vibrant market, I would say. And and all these, the capital raise is actually absorbing a lot of surplus liquidity we we are seeing. Now even going forward, I think in the next two months itself, we're seeing almost 5 to $6,000,000,000 of fresh funds being raised. If I look at the number of companies which have filed prospectus with the regulator for IPOs, I think it goes up to almost 200 companies which have already filed. So really the the

24:52 avenue for deploying this surplus money is there. But what we are seeing is a very interesting bunch of companies which are listing. You know, it's it's across sectors, from digital companies to auto companies to, you know, hospital chains. It's a whole range of companies which are which are listing and really deepening the breadth of the market.

25:15 So having said that, so how are we investing in in such such an an environment? So what we are really focused is we are very bottom up, you know, with feet on the ground. What we really try and do is look at investing in the in the in the longer term and very sensitive on three factors. The first is the management quality. The second is on the business itself. We never invest commoditized businesses and this only invest in business which are scalable and have some form of USP or entry barrier. And finally, we always look at, free cash and ROCs. I mean, we will not invest in businesses which do not generate free cash. Over time, what we've done is, we have a very stable team. The top three of us have been working together for over a decade now. So we've created very strong processes to ensure we don't make mistakes. And the reason so is that at many occasion, we've been the first institution invest in a company.

26:18 So what we've done is we've created what is called a universe, and the universe only includes companies which meet all the criteria which are highlighted on top.

26:27 We've created our own models and templates which ensure efficiency, but also so that we can compare across sectors and companies within the sector and the ratios we we really we we we in the standardized ratios. But more importantly, I think we are the focus is really on the long term and buying businesses which we see keep compounding over time. Our basic philosophy is that India is a is a growth story, and you just gotta leverage on on that growth without taking too much risk.

27:02 So on the portfolio itself, what I've tried doing is bucketing most of the stocks in four buckets. But what you'll see is really the focus is really it's a very growth oriented portfolio. On the extreme left is where a bulk of our companies lie, which are what we call consistent compounders. Great businesses which are steadily compounding earnings at almost 15% per annum, and you're just playing the earnings growth story, a lot of the new stocks that you've added over the last three years, I would say, come in this high growth growth bucket where the earnings itself are growing at 25% plus over over a period of time. What we find in our portfolio, leverage levels are very low. We our portfolio is fairly concentrated.

27:49 Though having said that, you know, three years back, we would have had a portfolio for about 30 stocks. Today, are at about 38 stocks. And the simple reason we have a higher number of stocks is that in many, we are not taking a very big position of three to 4% because the valuation is still slightly toppy,

28:07 and we'd have rather bought in at slightly lower valuations. Just to give a perspective from a top down perspective, what we also ensure is we are playing in the right segments of the market. So digitization is a big team, and here we've got companies pure digital companies plus also ensuring that companies other companies are leveraging on on the changes

28:31 on the digitization side. We have a big exposure in the reallocation of supply chains. So we have everything from EMS, electronic manufacturing companies, auto ancillaries, pharmaceutical companies, chemicals, and textile companies, all gaining of the supply chain shifts. Consumption has been an evergreen theme of ours, and it's always the largest part of our portfolio. And this is really playing the demographic story. And finally, there's the CAPITED team where we have a range of companies like cement, power transmission, railways, engine manufacturing, etcetera.

29:13 On a portfolio activity, over the last one year, you know, our portfolio trading is fairly low. I mean, we've added typically, we'd add, at best, three to four companies every year. What we buy, we buy for the long term. We would be spending a lot more time on balancing weight, so there's a lot of trimming and adding weights based on the volatility of these stock companies. But whatever we buy, we buy with the intent that we want to own it for at least three to three to three to five years.

29:46 Coming to the portfolio characteristics, if you see the pie chart on the left, 65% of our portfolio today is in small caps. Our large caps is about 6%, but these are only companies which have moved from the small to mid and large cap rather than and it's not a large cap which we bought. In terms of the chart pie on the right, our largest exposure would be in consumption between the discrete tree and staples would be somewhere around 21%, followed by financials, which would be about 18%. Otherwise, it's very individual driven driven companies. On the valuation side, today, we are looking at the multiples for f y '27, and our portfolio weight multiples about 21 times.

30:34 This is, I would say, on the higher end. And historically, we'd have been closer to 16 to 17 times multiple.

30:42 And the reason behind behind this is, one, the market valuation's up. But I would say our top four or five companies also one of the some of the highest growth companies we have in our portfolio, and many of them are seeing sustained earnings growth of over 30%. In terms of portfolio growth, I would say f y twenty six is is very strong. It's almost 25%. It's also because of a slight low base that f y twenty five was weak. But I would say we are fairly confident that this portfolio should be able to deliver deliver this this this growth. So really, it's it's I would say to summarize, you know, earnings growth is very strong. Valuations are at the higher end,

31:27 but we're fairly confident this growth should be should be met. Just on our performance, to give a longer term perspective, we've been managing the fund since 2011. I've been managing it. And since then, the sterling returns have been compounding at about 13%. In the last three years, we've done about 30%. It's underperformed the the mid cap index over a three year perspective, But if you look at the versus the broader MSCI India index, it's up it's outperformed handsomely. Our whole philosophy is that you deliver a portfolio with earnings growth of about 15% compounding, and the earnings itself will will ride you out going forward.

32:16 And I'll end with my favorite slide, and this is really about India once again, that if you look at the India market performance in sterling terms over a long time period of ten, fifteen, or twenty years, India has actually been amongst the best performing markets and has delivered consistent returns equivalent even to The US markets. And the reason behind that is that, you know, the nominal GDP growth itself of the economy has been about 10 to 11%, and and, you know, you're just trying to outperform that nominal growth. And our own belief is going forward, the g nominal GDP growth should actually exceed what we've delivered in the past five years because of the sort of changes that have already happened in the economy.

33:04 So I'll end there and and take questions. Gaurav, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab situated on the top right corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you the recording of this presentation along with a copy of the slides and the published Q and A can be accessed by our investor dashboard. As you can see, we received a number of questions throughout today's presentation. Lucy, can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end? Thank you. Thanks, Gaurav. That was helpful. We've got some questions coming through. So the first one, are you actively tilting towards outperforming sectors like autos and consumer durables, or do you prefer to hold steady given the fund's long term mandate?

33:55 Well, I don't think we kind of switch around just because of news flows. But having said that, if I take the trend over the last three years, we've gradually moved more and more towards consumer discretionary portfolio versus consumer staples. So we own within discretionary, you know, you know, we've got a luggage manufacturers, electronic manufacturers, style manufacturers. And in the auto space, we've actually got four companies, but all in the auto ancillary space, which are playing the domestic story as well as as as the global story. So it's a a there's a shift, which is it's a gradual shift which we've seen playing more on the discretionary space than the staple space.

34:42 Thank you. And with Skipper expanding into Western markets to capture China plus one opportunities, how significant could exports become in the revenue mix over the next three to five years? Well, currently, the revenue mix is about 20% exports. They've been targeting to take it to about 50% of their overall book. But my sense is they may not achieve it simply because what's happened is there's a lot of demand both in the domestic mark in the domestic market itself. So they are kind of in a situation for the next three to four years. The order books are absolutely full. So they've been expanding capacity. The challenge is really that where do they divert the capacity.

35:29 So it's more of a issue of capacity than demand. What's happened with them is, you know, the the power sector went through a five or six year slump from, I think, 2012, to 2000, '21. And what they did in that period was built up all the credentials and approvals with all the regulatory bodies in different markets. So today, they can export to The US. They can export to Europe, etcetera. So they have all the credentials in place. It's more about now trying to divert the capacities to where, you know it's more of a capacity issue than where you want to than the the mix. And to give you a perspective, you know, I mean, when we last spent the management was actually saying is some of the competitors are saying, you know, why don't you supply to us because they're also short of capacity. So it's really a situation where the, you know, the sort of expansion that's happening globally on the power transmission space, there's a huge shortfall and Skipper is just in the right place at the right time.

36:41 Thank you. And are you considering renewable energy companies such as geothermal energy production? It's quite specific. Not geothermal. I mean, if you're referring to coal side, no. But we've looked at a lot of companies in the renewable space. And, you know, and and in India, you can play it across everything from, you know, just pure fully integrated solar companies to just module manufacturer to you know, the whole range is now available to play including the EPC companies, etcetera. What we're finding is we're just not comfortable with the valuation. There's a lot of growth, and my sense is the worry we have is what happened after 2028.

37:28 Because till now, you're seeing a whole you know, the next three years look very strong, and the order books are very strong, and the demand pattern is very strong. But what we are also finding is that the number of players is is huge. And I would say in the last three months itself, three three different solar companies have listed. You know, I think you have about seven such listed companies in the solar segment itself. And we're very confused because we find that there were so many unlisted companies and so many such large companies that we've kind of worried that we'll you know, right now profitability is at all time high. So we kind of worried that what will happen in 2028. Will the whole thing just collapse? And the markets will, you know, factor that in much earlier. So we don't wanna be caught on the wrong side.

38:18 I think it's a very, very rapidly evolving segment. And we've done a hell of a lot of work on it, but we've just not been able to get that confidence that we are in the it's the right time to enter because valuations are definitely not cheap across the board. Thank you. And if we look at rising wages as some companies input pressure and others revenue opportunity, how is IGC positioned versus the index in terms of weightings? Sorry. In terms of wages, is it? Weightings. Yeah. No. So if we look at rising wages as some companies input pressure and others revenue opportunity, how is IGC positioned versus the index in terms of weightings? So I would say, you know, we are very bottom up. And versus the mid cap index, we're almost 80 or 90% of benchmarks.

39:11 So we really don't look at what the weights are there or what are the companies in the benchmark. We really go by an individual company's own growth story. And sort of the really two aspects is one is the sort of revenue growth we see. The second is where you see the margins trend in terms of what are the cost cost impacts. I think wages was a big issue, especially in the in the banking space where you had a very high turnover and wages were growing at almost 15 to 16% per annum. But I think that phase is behind. I would say the last three years, had very strong growth in wages across the board were rising across companies. I think that pressure is over. We still see wages on an average going from seven to 10 odd percent, but the revenue growth should ideally offset that.

40:00 So I don't see wages being a reason for margin compression in India, at least. I think here, I I would say there's, I mean, the demographics are very favorable in that sense. It's it's yes. There is a shortage of some skill sets at at the technical level, but I don't see there's wages is something that we worry too much about. Thank you. And we've got one more here. Index level margins look very high compared to history in both large and small caps. Where do you see the biggest risks of mean reversion and sources driving margin compression, And what are the opportunities around this from an active management perspective? How do IGC's portfolio company profit margins look versus their own history?

40:49 So I think that's two questions. Yeah. So I would say one of the reasons earnings growth was weak last year was that there was margin compression. And the reason was in the in the prior three years, margins went through the roof because raw material prices came down, and most companies really took it on the margin side. And since then, they've been they've been coming off. I can't generalize on margin, but I I would say now there is most stability. There are certain sectors, especially in the capital good sectors where margins are at abnormally high levels, and you're already factoring that in. And I I'll I'll give you specific cases, like, say, typically capital goods company and take some of the global ones, like, say, an ABB or a etcetera. You know, they were trading at their margins of 9%, which went all the way to 19% last year.

41:41 And that should stabilize somewhere at 16%. So you're already factoring these sort of adjustments in in your numbers. I agree that I think two count f y twenty four was and '25 were normally high, and they've actually come down, is why you also see that softness in earnings growth. But it's very, very sector specific. You know, each each sector has its has its own story. But the peak peak margins are behind, and and the correction a lot of that correction has happened. Thank you, Gaurav. I think that's all the questions for today. Gaurav, thank you for answering all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the InvestoMeet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Gaurav, could I please just ask you for a few closing comments?

42:31 Yeah. Thank you. So, really, what I would say is that, you know, the economy has seen a bit of a consolidation phase after very, very strong years. I would say earnings have bottomed out. A lot has been done by the government to kick start that growth cycle. And my sense is we are gonna I mean, we're already building, factoring in in in in the upside on the earnings. Having said that, the market absolute valuation are still on the higher side. So at best, I would say the margin the, you know, the the market should move more in line with the earnings growth now. But I think the worst is definitely behind on on the, you know, the the uncertainty factor, at least on the domestic side. I think if any worry, it's more on on global factors.

43:19 And but, really, the government is really going all out to get that growth again. And I think from a government perspective, I don't think we can ask anything more. So it's really now about, you know, the fundamentals again driving India. But the long term story is still looking very, very attractive. It's only some of the geopolitics which is which is creating some bit of uncertainty. Gaurav, thank you for updating investors today. Can I please ask investors not to close this session? It shall now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team of INDIA CAPITAL GROWTH FUNDLIMITED, we'd like to thank you for attending today's presentation, and good morning to you all.