Pension money starts to trickle into India

26 June 2014   Category: News, Asia, Global, India, Canada   By Maya Ando

Global pension funds have been increasingly allocating to India’s private sector amid a stock market recovery following the election of Narendra Modi as prime minister.

With Mr. Modi’s strategy to boost the country’s economy focussed on attracting more investment, top institutional investors including pensions and sovereign wealth funds are beginning to listen.

Private equity executives told Asia Asset Management that investors now have prominent and potentially lucrative exit options such as IPOs and trade sales, which are helping to lure foreign institutions. In May, ICICI Bank Ltd, India’s second-largest lender, closed a US$825 million fund alongside Apollo Global Management LLC.

This week, meanwhile, the Canada Pension Plan Investment Board (CPPIB), which had C$219 billion (US$203.77 billion) in assets as of the end of March this year, closed its first infrastructure deal in India.

The fund will invest up to $332 million in infrastructure in the country via a unit of Larsen & Toubro (L&T), one of India’s largest engineering and manufacturing conglomerates, whose assets include a portfolio of major toll roads.

CPPIB will initially invest $166 million through its Singapore subsidiary, followed by a further $166 million within 12 months. The investment will be converted into equity by 2018, giving CPPIB a minority stake in the L&T unit.

CPPIB’s senior vice-president, André Bourbonnais, added: “This transaction represents CPPIB’s first investment in India’s infrastructure sector with a highly reputable partner and fits well with our strategy for India as a key long-term growth market.”