Baron India Fund: Latest Insights and Commentary

CONTRIBUTORS

• Divi's Laboratories Limited is a leading global manufacturer of active pharmaceutical ingredients (APIs) and intermediates. The stock contributed to performance, driven by stronger-than-expected quarterly revenue and profit and supported by shipments of GLP-1 API validation batches. In our view, the company is a key beneficiary of global supply chain realignment as innovator and generic customers diversify API sourcing away from China. We are encouraged that Divi’s has been onboarded by large global pharmaceutical companies as a supplier of complex intermediates and custom-manufactured peptides for oral and injectable GLP-1 therapies. This opportunity underscores Divi’s strengths in large-scale, late-stage commercial manufacturing and provides multi-year revenue visibility as GLP-1 demand continues to expand globally. We are also encouraged by the company’s commitment to capacity expansion and sustained focus on research and development. We retain conviction and expect Divi’s to deliver mid-teens compounded revenue growth and 20% earnings growth over the next three to five years.
• Precision Wires India Limited is the largest manufacturer of enameled copper winding wire in India, with approximately 30% market share. The company’s products — critical inputs for power transformers, generators, and electric motors — are supplied across automotive, aerospace and defense, power, electronics, home appliances, and infrastructure end markets. Shares were up during the quarter, driven by strong sales growth and profitability. We believe Precision Wires is well positioned to capitalize on India’s power-sector upcycle, with accelerated power generation capacity additions expected to drive sustained demand for winding wire. Growth in India’s electric vehicle (EV) market should also support increasing demand for EV-grade winding wire, reinforcing our expectation that the company can deliver 15% to 20% compounded revenue growth over the next three to five years. Long term, we think Precision Wires will continue to benefit from its scale of operations, strong innovation capabilities, and relationships with original equipment manufacturers.
• Centum Electronics Limited is a leading electronics manufacturing services provider in India, providing design and manufacturing solutions for mission-critical applications across defense, aerospace, industrial, and automotive industries. The stock contributed to performance, driven by robust quarterly results. We remain investors. We believe Centum is well positioned to benefit from the Indian government’s “Make in India” initiative, which encourages domestic manufacturing of electronic products and components by providing attractive tax subsidies and infrastructure support. Amid escalating global geopolitical tensions, we see additional upside from India’s push to indigenize defense equipment design and production, a trend that should benefit electronic system providers like Centum. We expect Centum to deliver approximately 25% compounded revenue and EBITDA growth over the next three to five years.

DETRACTORS

• HDFC Bank Limited is one of India’s largest private sector banks, offering a broad range of financial services to retail and commercial clients. Shares fell as investors focused on weaker-than-expected profitability, leadership uncertainty, and a broad selloff in Indian equities. Second-quarter results showed sequential compression in net interest margin as funding costs remained elevated, raising concerns about profitability despite healthy loan growth. Sentiment deteriorated further after Chief Executive Officer (CEO) Sashidhar Jagdishan decided not to seek reappointment, adding to leadership concerns following the unexpected resignation of the bank’s chairman. These company-specific issues were compounded by foreign investor outflows and a sharp September decline in Indian equities amid macroeconomic headwinds from higher global oil prices. Anup Bagchi’s October 2026 appointment as CEO should ease leadership uncertainty, backed by 30-plus years of experience with the ICICI Group. We believe HDFC Bank remains a solid long-term opportunity, well positioned to benefit from India's ongoing financial deepening given its strong franchise, deposit base, and broad distribution network.
• Shares of Bajaj Finance Limited, a leading non-bank financial company in India, declined due to two key headwinds. A proposal from the Insurance Regulatory and Development Authority of India (IRDAI) to revise insurance commission structures weighed on the stock given Bajaj’s exposure to insurance distribution, while the company’s planned equity capital raise through a Qualified Institutional Placement (QIP) raised dilution concerns. We retain conviction in Bajaj given its best-in-class management team, robust long-term growth outlook, and conservative risk management framework. We believe the company is well positioned to benefit from growing demand for consumer financial services, including mortgages, personal loans, credit card loans, and related products.
• Max Healthcare Institute Limited is a leading hospital chain in India, operating more than 6,000 beds across its network of 21 healthcare facilities. Shares detracted from performance during the quarter as the Supreme Court requested that the government examine hospital pharmacy and consumables margins, raising concerns about profitability across the industry. We continue to own the stock. Under the leadership of Abhay Soi, management has focused on cost optimization at mature facilities, improving profitability at greenfield projects, and realizing synergies from recently acquired hospitals. These efforts have helped Max Healthcare differentiate itself from peers, with best-in-class EBITDA margins, average revenue per occupied bed, and return on invested capital. We remain optimistic about the multi-year growth opportunity in Indian hospital services and believe Max Healthcare is well positioned to benefit from ongoing industry consolidation. We expect the company to more than double EBITDA and sustain mid-teens revenue growth over the next three to five years.

The Quarterly Attribution Analysis for period ending September 30, 2026, is not yet available.