Results of the India Fund Repurchase Offer

IFN will payout $56.4285 per share of IFN and from my account at scottrade it seems that they accepted all my shares!! So the rights offer was a great deal and I hope to buy some IFN back in time for the dividend after they deposit the money in my account. As of Friday (the day of the offer), the discount on IFN was nearly 12%.

I hope you made some money reading this blog!

15 thoughts on “Results of the India Fund Repurchase Offer

  1. Asad Subedar says:

    Hello,

    Congratulations on accepting the tender offer! Like yourself I have been following this ETF for the past couple of years and hopefully there will be another arbitrage opportunity in 6 months 🙂

    With that said I have a couple questions for you since it has been difficult for me to find people that are investing in the India Fund let alone in India.

    1. Why choose IFN instead of the other’s (ex. iif inp mindx etgix fni)?
    2. I’ve read in various places that if you were to purchase identical shares in India that are offered in the US, they would be cheaper in India. Unfortunately I am not an Indian citizen and I beleive that I cannot directly purchase Indian stocks. Is there any way around this? The only option that I have come up with is to open an account under my mother’s name and purchase shares that way.

    That’s it for now, if I come across any article on the Indian stock market I will be sure to pass it along. Have a nice evening.

    Thanks,
    Asad Subedar
    Univ. of Florida

  2. Sidd says:

    1. As for IIF vs IFN, I liked the stocks picked by IFN better. I also invest in INP and for a new person investing in India, I would recommend INP over IFN because of lower premium/discount to NAV and not having to follow those. For others IFN is good because of the repurchase/rights offers. FNI is not India only. Also I have owned IFN long before INP came out. As for MINDX, ETGIX etc., I prefer ETFs to regular funds. I can invest smaller amounts, trade frequently, have lower expense ratios.

    2. That is true. Indian ADRS genreally trade at a premium. That’s why it makes sense to get INP or some other India fund. But I do have a page to keep track of premiums – ADR Premiums – and you can buy when premiums become low (e.g. now is a good time).

  3. Asad Subedar says:

    Hello,

    Thank you for your response and the link to the ADR premium/discount list. In this list you have Wipro Industries ADR trading at a premium of roughly 20%. In your experience does this translate into the company being undervalued in India or overvalued in the US?

    Also if you are an NRI do you invest directly in the Indian market and if so how does one go about doing that? Is the tax situation complex (ie. NRI with capital gain/loss in another country repatriating the profits back to the US)?

    Thanks,
    Asad Subedar
    Univ. of Florida

  4. Sidd says:

    Generally it is overvalued in the US (in my opinion) but that has always been the case for Indian Techs. There have been times when the premiums were>50%

    I am an NRI but I don’t invest in India directly yet. I have no idea what the tax situation would be. I do know that NRis can open accounts with Indian banks and trade stocks etc. on Indian markets and if you find someone who does that, I would like to know.

  5. Asad Subedar says:

    Hello Sidd,

    So as an example at current prices would Tata Motors be a company you would invest in (1.64% discount)? I will follow them over the next few months to see how the premium/discount plays out.

    In regards to an NRI investing directly in the Indian market I will ask my parents if they can open up an account for me under their name once I find out what kind of account to open up in the first place. Verifying the tax implications for them first though.

    Also I read that you trade through Scottrade and that you had the option of accepting the tender offer until Friday, is this correct? I am with TD Ameritrade and I had to make my decision 3 days in advance on Tuesday.

    Thanks,
    Asad Subedar
    Univ. of Florida

  6. Sidd says:

    Yes that is correct. The $ price was 1.64% less than the price in Rs. The page takes the current price of TTM compares that with the current price in India at the current exchange rate.

    Yes Scottrade accepts decisions upto 10am on the day of the expiry of the offer.

  7. Ben Lawler says:

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  8. Asad Subedar says:

    Hello again Sidd,

    Since you utilize Scottrade and I utilize TD Ameritrade could you please let me know when the deposit is made by them. I am curious to see if they are both different since Scottrade allowed the repurchase decision to be made until Friday while TD Ameritrade wanted it to be done by Tuesday.

    Thanks,
    Asad Subedar
    Univ. of Florida

  9. Dave Nofmeister says:

    I know this is a bit off of topic, but does India have any good index funds? For example, the American S&P 500 has been a big index fund for some time.

    Thanks!

  10. Sidd says:

    Dave,

    You are confusing Indexes (Indices?) with Index Funds. S&P 500 is an index while SPY, VFINX etc. are Index Funds that are based on the S&P 500.

    India has Indices too. Nifty and Sensex. If you are investing from the US, INP is as close to an Indian Index fund as you can get. INP is not really a fund but it tracks the top 68 stocks on the National Stock Exchange in India including dividends.

  11. Sidd says:

    Asad,

    The money was deposited a few minutes ago. (about 11am today)

    Siddharth

  12. Asad Subedar says:

    Hello Sidd,

    Just wanted to mention that Ameritrade deposited the money late Friday evening so it seems they were 2 trading days behind Scottrade. This is unfortunate since I would have liked to repurchase the shares before the upwards movement. But it seems I have the same strategy as you, wait until it dips below $50. I remember earlier this year my limit was sub $40 and it was difficult not to pull the trigger beforehand. Happy trading!

    Thanks,
    Asad Subedar
    Univ. of Florida

  13. Asad Subedar says:

    Hello Sidd,

    It has been some time. If you are still holding IFN have you made a decision on the current repurchase offer? Just curious to know if the spread between the NAV and stock price will be enough to cover the 2% repurchase fee. Happy trading!

    Thanks,
    Asad Subedar

  14. Sidd says:

    Yes I still own IFN but I generally am adding to my position not selling. The fund currently trades at a discount of 4.2% – http://www.blackstone.com/cps/rde/xchg/bxcom/hs/businesses_aam_cama_closedend_india.htm
    but counting the 2% repurchase fee and whatever your broker charges (Scottrade charges $25), it might not be worth it. Also the spread narrows as the day approaches. So if you want to sell, there might not be much difference between open market and the repurchase offer.

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