Sovereign investors see bright spot in India

Sovereign wealth funds and state pensions funds are focusing on opportunities in Indian private equity encouraged by reforms in foreign direct investment and its rapid urbanisation, according to a report from the Atlanta-headquartered investment manager Invesco released at its media conference in Hong Kong today.

The report, Global Sovereign Asset Management Study 2017, which collected responses form 97 institutional investors with assets more than $12 trillion, also noted that India has seen increasing private sector attractiveness among sovereign investors, scoring 7.1 out of 10 in Q1 2017, against 5.6 in 2015 and 5.9 in 2016.

One reason is the country’s reforms on foreign direct investment (FDI) last year, which liberalised sectors including pharmaceuticals, food, retail as well as rail infrastructure, defence and aviation. India’s commerce and industry ministry reported FDI inflows reached nearly $60 billion as of end-March 2016 versus $44 billion in 2015.

India’s publicly listed markets also have relatively low coverage of the wider economy – stock market capitalisation is at 65 percent of GDP in India, compared with 146 percent in the US and 112 percent in the UK – which has led investors to turn their focus on opportunities within private equity, the report added.

The report also noted that investors are developing internal management expertise based in India to have greater access and control over private equity investments in India. At the same time however, investors surveyed cited continuing concerns over governance and liquidity over private equity investments.

The Canada Pension Plan Investment Board, which set up its office in Mumbai in October 2015, has been scaling up investment in India. In May this year, the pension giant committed $500 million for a joint venture with IndoSpace, India’s largest developer of modern industrial and logistics real estate. In March, CPPIB teamed up with KKR to acquire telecommunications provider Bharti Airtel for $951.6 million. The Canadian pension has also backed funds managed by India-focused private equity firms including Multiples Alternate Asset Management and Kotak Mahindra Group.