Largest QFI investment in India facilitated by Citi
13 March 2013
News, Asia, India
By Asia Asset Management
Citi India announced on March 11 it acted as a Qualified Depository Participant (QDP), custodian as well as the execution broker for an investment made by Sanlam, one of South Africa’s largest financial services groups, through the Qualified Foreign Investor (QFI) scheme. The investment of around US$111 million is the largest investment made by a QFI in India, since the easing of QFI regulations for investing in Indian equities over the past few quarters.
The transaction, the first of its kind supported by a foreign bank custodian in India, reinforces the efforts of the government of India (GOI) to allow QFIs to directly invest in the Indian equity market, with Sanlam making an equity investment in a listed stock in India through this scheme.
Speaking on the timely execution of the deal, Gerrit Van Heerde, CFO of Sanlam emerging markets, says: “This was an important investment in a group company of one of our long-standing partners in India. The investment made through the QFI scheme ably supported by Citi India, demonstrates the capabilities of its people and platform in making an extremely difficult deal become reality. The advantages of the QFI scheme are immense in time sensitive deals as this one.”
On the success of the deal, Debopama Sen, country head, India of securities and fund services for Citi, says: “Citi continues to actively engage in discussions with regulators and investors across diverse forums, highlighting the multiple benefits of a simplified QFI framework as one of the preferred investment routes into the Indian markets. Sanlam’s investment through this route is extremely encouraging and we look forward to further investments from other leading investors in our portfolio using the simplified QFI route.”
Commenting on the investment made by Sanlam, Gagan Rai, managing director and CEO, National Securities Depositary Limited says: “Citi was among our first custodian partners who have been at the forefront of educating investors on newer formats of investment like the recently simplified QFI scheme. As the central depository, we understand Sanlam’s recent investment of around US$111 million is the single largest QFI investment in direct equity in India post the several amendments made to the QFI regulations over the last few quarters. Post this transaction, current investments stand at approximately 6.8 billion rupees (US$126 million) in Indian equities and 4.4 billion rupees in fixed income through this investment route. We are confident that investments will significantly increase over the year as investors understand the many benefits of investing as a QFI.”
The QFI framework simplified India access for foreign investors who are members of the Financial Action Task Force (FATF) jurisdictions, allowing them to invest in India without being registered with the Securities and Exchange Board of India (SEBI) or meeting the set eligibility criteria for a Foreign Institutional Investor or Sub-Account in India. To encourage the use of this investment route, Citi has been in active discussions with various potential QFIs and regulators, to simplify the requirements further and attract fresh investments under this scheme. The revised guidelines announced by the GOI permits QFIs to open a segregated bank account in India and allow QDPs to rely on authorised intermediaries like global custodians to verify certain documents, allow PAN card copy to be verified online, among others. These changes in regulations are expected to widen the class of foreign investors and deepen the Indian capital market, thereby helping reduce market volatility in the equity markets.
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