SWFs home in on India investments following Modi victory

17 June 2014   Category: News, Asia, Global, India, Middle East   By Derek Au

A number of overseas sovereign wealth funds (SWF) and pension funds are increasing investments into Indian assets amid hopes of an economic recovery spearheaded by the election of Narendra Modi.

Indian business newspaper The Economic Times reported that at least three SWFs from the Middle East have invested a combined US$5 billion into the country over the past eight months, while one pension fund has committed to invest $450 million. Other investors are also eyeing India’s real estate and infrastructure sectors, the newspaper claimed.

The report quoted the unnamed head of a realty fund which has secured investments from two SWFs in the Middle East. They reckoned that the investments could also have a long horizon, as SWFs generally face less redemption pressure compared to other investors such as private equity funds.

In March, Abu Dhabi-based energy investment firm Taqa, together with a Canadian pension fund and an Indian private equity fund, came to an agreement with Jaypee Group in March to purchase a 51% stake in its thermal power projects for $1.5 billion.

In July last year, Oman SWF the State General Reserve Fund partnered with the Government of Singapore Investment Corporation and Temasek to commit $200 million to a real estate fund operated by the Housing Development Finance Corporation, India’s biggest mortgage lender.

Interest among overseas investors has swelled after the pro-business Mr. Modi thundered to victory in India’s election in May. The Bharatiya Janata Party (BJP), led by Mr. Modi, campaigned hard for disruptive change with one of its main themes being ‘Minimum Government, Maximum Governance’. Much hope has been put in the new government’s potential to turn around the languishing Indian economy.

More encouraging signs emerged last week, when Indian President Pranab Mukherjee laid out a new economic agenda, which includes encouraging foreign investment, speeding up approvals for major business projects and engaging with neighbours to bring India back onto a high-growth path. A study by The Associated Chambers of Commerce and Industry of India projected foreign investment inflows would more than double and exceed $60 billion this fiscal year, as overseas investors regain confidence in the economy.

On the back of a more positive outlook, pension funds are also revisiting investment opportunities in India. The Canada Pension Plan Investment Board, which manages $218.1 billion of assets, formed joint ventures in November last year to increase exposure to Indian real estate with committed capital of $450 million.