Baron India Fund: Latest Insights and Commentary

The Review and Outlook for period ending June 30, 2025, is not yet available.

CONTRIBUTORS

• Bharti Airtel Limited is a leading telecommunications company, with operations in 18 countries across Asia and Africa. The company’s offerings include wireless services, mobile commerce, and fixed-line broadband. Shares rose on steady earnings and visibility into strong future free cash flow generation, as the company has moved past its period of peak capital intensity. As India’s dominant mobile operator, Bharti Airtel is benefiting from ongoing industry consolidation. In particular, competitor Vodafone Idea appears on the verge of bankruptcy amid severe pricing pressure and an unsustainable balance sheet. We retain conviction in Bharti Airtel as it continues to transform into a digital services provider and capitalize on rising mobile tariffs.
• Max Healthcare Institute Limited is a leading hospital chain in India led by CEO Abhay Soi, a restructuring specialist with expertise in cutting costs and improving return metrics at poorly managed hospitals. These efforts have helped Max Healthcare stand out among its peers with best-in-class EBITDA margins, average revenue per occupied bed, and return on invested capital. Shares rose during the quarter, driven by sustained revenue and profitability growth, as well as strong visibility into network expansion. We are excited about the multi-year growth opportunity for hospital services in India, and we view Max Healthcare as a key beneficiary of ongoing industry consolidation. We expect the company to more than double EBITDA while sustaining mid-teens revenue growth over the next three to five years.
• Reliance Industries Limited is India’s leading conglomerate, with businesses spanning petrochemicals, refining, and oil- and gas-related operations as well as retail, telecommunications, and media. Shares rose during the quarter due to a strong recovery in retail growth following a period of store rationalization. We believe Reliance is well positioned to leverage its telecommunications network to evolve into a digital services company, with offerings such as video streaming, broadband, and e-commerce services. Reliance is also laying the foundation to create an online marketplace that will connect roughly 13 million mom-and-pop retailers to over 480 million mobile and internet subscribers. We believe earnings will sustain mid-teens growth over the next three to five years.

 

DETRACTORS

• Tata Consultancy Services Limited (TCS) is India’s largest IT services company. Shares were down due to investor concerns that a slowdown in the global economy could lead to lower discretionary IT spending and a prolonged revenue conversion cycle for TCS. We retain conviction in TCS, as it is uniquely positioned to benefit from structural growth opportunities arising from a multi-year cloud migration journey by global enterprises. Given its large scale and R&D capabilities, we believe TCS will continue to capture share from smaller players as customers increasingly consolidate their IT services vendor base. Backed by the renowned Tata Group, TCS enjoys best-in-class corporate governance and a strong leadership bench. In our view, TCS also stands out from the competition due to its best-in-class employee retention, which is one of the key drivers of its industry-leading profitability and return profile. We expect TCS to sustain low double-digit earnings growth over the next three to five years and to consistently return at least 80% of profit to shareholders through dividends and share buybacks.
• Shaily Engineering Plastics Limited is a leading Indian manufacturer of precision injection-molded plastic components, with diverse product offerings spanning categories such as furniture, pharmaceuticals, and toys. Shares fell during the quarter, likely due to profit-taking, despite the company reporting strong quarterly results and outlining plans for a significant ramp-up in its GLP-1 pen business over the coming year. We remain invested in Shaily, as we believe the company is well positioned to benefit from global supply chain diversification away from China, as well as opportunities in GLP-1 pen manufacturing.
• Siemens Energy India Limited (SEIL) is India’s leading power equipment manufacturer, offering solutions for power generation and transmission. The company's product portfolio includes power transformers, generators, and gas and steam turbines. SEIL was a modest detractor during the quarter after we received shares as part of a spin-off from Siemens Limited. We retain conviction in SEIL as a key beneficiary of India’s ongoing power sector reforms, which are expected to drive a multi-year investment cycle in inter-state transmission infrastructure to meet rising electricity demand and integrate renewable energy sources into the national grid. In our view, SEIL is well positioned to capitalize on this opportunity given its broad capabilities across equipment, services, and engineering, procurement, and construction. We expect the company to deliver over 20% compounded earnings growth over the next three to five years.