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. While the final size hasn’t been finalised, it’s keen to allocate $2-3 billion for the purpose, said the people cited above. Agarwal was principal at public market fund Westbridge Capital.
GIC is the world’s sixth-largest sovereign wealth fund (SWF) with $440 billion in assets under management. The fund, which had set up its India office in 2011, has deployed about $10 billion in Indian stocks and a total of about $20 billion in infrastructure, private equity and public equity. Along with Agarwal, a team of four-five executives will also be formed for the new fund, said one of the persons cited above.
Agarwal was involved in several public market investments of Westbridge Capital such as Kajaria Ceramics and private airline IndiGo. Prior to Westbridge, Aditya was among the first members of the India team at International Finance Corporation.
GIC and Agarwal declined to comment.
GIC’s significant public market bets in India include mortgage lender HDFC Ltd, ICICI Bank, Bandhan Bank and Bharti Airtel. Last month, it invested Rs 5,512 crore in Reliance Retail Ventures, a subsidiary of Reliance Industries, to acquire a 1.22% equity stake.
“The India-dedicated fund or specific allocation for public market will help these global funds deploy more money into mid-cap equities,” said a Mumbai-based investment banker who deals with GIC as a client.
Tax relief for SWFs to boost investments
“From the global pool, they prefer to invest in large-cap companies. Besides, the support given by the Indian government for sovereign funds will also boost the confidence to deploy more capital in the public market, along with private equity and infrastructure,” the I-banker said.
The central government’s move to grant 100% tax exemption for SWFs on investments in infrastructure is expected to boost the flow from them.
The sharp rally in equity markets in India makes the public market a sought-after investment destination for sovereign and pension funds across the globe. From a one-year low of 25,638.9 on March 24, on the eve of the Covid-19 lockdown, the Sensex has rallied more than 70% to a record 44,800 recently.
The rally is expected to continue and hit new highs in 2021, according to a recent Reuters poll. It’s seen rising about 4% to 47,550 by the end of 2021, with forecasts ranging from 36,000 to 54,400, it said.
“Indian equities have seen a rapid recovery from the pandemic-driven Q1 sell-off, along with a rally in the global equity markets. While the market returns have been more defensive-led and concentrated in nature this year, we expect further equity gains driven by earnings,” said economists at Goldman Sachs.
Sunil Koul, Asia Pacific portfolio strategist at Goldman Sachs, said, “Despite the sharp rally, Indian equities have lagged this year relative to North Asian peers and have underperformed the broader MSCI Asia Pacific Ex Japan Index (MXAPJ) region by 10 pp year to date.”
Other sovereign funds that have been aggressively investing in India are Temasek, also from Singapore, and Abu Dhabi Investment Authority (ADIA).