Singapore GIC sets sights on first Indian fund

Buoyed by bull runs and strong underlying fundamentals of Indian economy, several sovereign wealth funds are keen to set up investment vehicles in the country.

Last month, when Indian Prime Minister Narendra Modi met the world's 20 largest pension and sovereign wealth funds at a virtual roundtable, high on the agenda was attracting more investments for the government's ambitious $150 billion infrastructure investment pipeline for the next five years. With the Indian government banking on infrastructure to be the driver of growth for the economy, the efforts to attract foreign investments come at a time when around half of the proposed infrastructure investments by 2025 will have to come from private and foreign investors. While that might look like a gargantuan task, the ground reality offers a lot of hope.

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After plateauing for three years around the $60 billion level, FDI inflows into India rose sharply in 2019-20 to $73.4 billion. Despite the economic impact of the coronavirus pandemic, the inflows have been steady in the current fiscal as well: in the April-August period, India received $35.7 billion of inflows, according to data with the Department for Promotion of Industry and Industrial Trade. And that investor exuberance doesn't just end with the FDI inflows.

Singapore's vote of confidence

Buoyed by bull runs and the strong underlying fundamentals of Indian markets, several foreign institutional investors are set to float major funds in the country - and that includes some of the world's biggest sovereign wealth funds (SWFs).

While Gulf SWFs such as the UAE's ADIA, Saudi Arabia's PIF and Qatar's QIA have large investment exposure to the Indian market, in what would be a first for the country, Singapore′s sovereign wealth fund GIC is planning to establish an India-dedicated public market fund.

The fund will be the first dedicated pool of capital for domestic equities set up by a large global financial institution.

Already one of the largest overseas investors in India, GIC has hired Aditya Agarwal to head its new fund as managing director and is looking to a mid-2021 launch, according to Economic Times. While the final size of the fund has not yet been finalised, people familiar with the investment told the paper that GIC was keen to allocate up to $3 billion for the purpose.

Agarwal - who was principal at public market fund Westbridge Capital - will set up the fund along with a team of four-five other executives.

“The India-dedicated fund or specific allocation for public markets will help these global funds deploy more money into mid-cap equities,” the paper quoted a source as saying.

With assets worth $440 billion, GIC is the world′s sixth-biggest sovereign investor and has invested in companies like Reliance Industries, HDFC, ICICI Bank, Bandhan Bank and Bharti Airtel in India.

“India and Singapore have developed a mutually beneficial relationship in select areas. Generally speaking, India and Singapore have a symbiotic relationship. India gets a significant amount of foreign direct investment from Singapore, which the Indian government is very focused on,” said Sharon Lau and Rajiv Gupta of Latham & Watkins. “It is also beneficial for India, since Singapore is a regulated jurisdiction, where the funds are subject to disclosure and regulation, offering comfort to the Indian government. While a number of funds are beginning to register themselves as an AIF (alternative investment fund) in India, which gives them access to onshore funding from Indian investors, however, as most funds have a pan-Asia focus, a significant number of funds invest in India through their Singapore entities,” they said.

According to data from the Indian Commerce and Industry Ministry, Singapore continues to be the top source of foreign direct investment (FDI) for India. In April-September 2020-21, $8.30 billion foreign inflows came from Singapore to India.

But it's not just Singapore which is excited by the market prospects in India. According to Girija Pande, Chairman of Apex Avalon Consulting, who has mentored Indian startups in deep technology from Singapore, Japan was also working on a $200 million fund of funds for startup investments in India, constrained in developing domestic startup ecosystem due to its small and stagnant economy.