Global pension funds increase their bets on India
Despite global challenges, India remains one of the fastest growing economies in the world, supported by a relatively stable macroeconomic environment.
Global SWF
“The benefits and merits of India for sovereign investors are clear: demographics, urbanisation, consistent and strong growth and, lately, an alternative to China,” Diego Lopez, managing director of GlobalSWF told AsianInvestor.
In 2023, there appears to be no shortage of interest, and investment, from some of the world’s largest pension fund investors and sovereign wealth funds across a range of sectors, particularly infrastructure, renewable energy and equities.
Also read: CDPQ sharpens focus on Indian renewables, infrastructure
Most recently, the Canada Pension Plan Investment Board (CPPIB) and Ontario Municipal Employees Retirement System (OMERS) have approved an investment of $530 million in IndInfravit, an Indian infrastructure investment trust (InvIT) majority owned by them, according to an April 25 filing.
This funding is linked to IndInfravit's acquisition of a portfolio of five Indian road assets from Brookfield Asset Management valued at $1.2 billion. The deal is expected to close soon, and the funds will be used to finance the acquisition, repay part of the debt, and for capital expenses.
Meanwhile, Caisse de dépôt et placement du Québec (CDPQ) is looking to grow its C$402 billion ($300 billion) portfolio in key sectors such as digital and sustainable infrastructure, mobility, and energy transition across Asia Pacific — and India is a large part of that strategy.
In India, CDPQ has also invested heavily in offices, logistics properties, and financial services and had $6 billion in total investments in India as of end-2022. The fund is currently the third largest state investor in the country’s infrastructure sector, behind Singapore’s GIC and CPPIB.
Indian equities
Danica Pension has recently turned its attention to India’s public equity markets.
The $59 billion Danish pension fund’s latest India mandate has shown a commitment to the market with an overallocation as its trajectory has become increasingly appealing, Esben Larsen, Danica Pension’s head of equities told AsianInvestor.
Larsen said the Danish fund had high expectations for the long-term potential of India, citing its well-regulated financial markets and transparent legal framework.
Even after two consecutive years of outperformance, it is still realistic to expect the Indian stock market to continue outperforming, according to James Thom, senior investment director of Asian equities at abrdn.
abrdn
"While it got off to a bumpy start, that is not a reflection of any material change within India itself. Fundamentally the country still looks compelling.” Thom told AsianInvestor.
Also read: KIC eyes India expansion
While India does face external headwinds, including a potential global recession, the domestic economy appears to be resilient enough to withstand external pressures such as falling exports, said Thom.
“Over the longer term, India is one of the largest consumer markets outside the US and China, with a large, predominantly young population–it is primed to overtake China as the most-populous nation—and an expanding middle class with rising levels of disposable income and a reform-oriented government."
The scope and structural growth potential remains massive as India powers towards becoming a US$5 trillion economy, said Thom.
“In the meantime, following the rotation out of Indian equities in Q1, valuations have now come down to more attractive levels relative to the rest of the region having previously looked a bit stretched,” he said.
Renewables
Sovereign investors are also seeing strong potential in India's renewable energy sector as the South Asian country seeks to power economic growth, according to Prashant Bhayani, chief investment officer Asia at BNP Paribas Wealth Management.
“India is moving forward with its green policies. As a net importer of oil and other hydrocarbons, it is important to move towards a healthier environment and finances. The current 2023 budget has a 48% increase in allocation to the Ministry of New and Renewable Energy,” Bhayani told AsianInvestor.
BNPWM
Areas of focus include off-grid solar projects, the national green hydrogen mission, a green energy corridor, bio-energy programs, and grid-connected wind and solar power projects, he said.
The sovereign wealth fund of the United Arab Emirates (UAE), Abu Dhabi Investment Authority (ADIA), has been a long-term investor in India across various asset classes including private equity, public equities, real estate, and infrastructure.
Within India, ADIA has significant minority stakes in renewable infrastructure companies ReNew Power (14.5%) and Greenko Group (14%) and is looking to allocate for capital to the growing sector.
Also read: ADIA eyes India's burgeoning renewables sector
“ADIA will continue to invest in Indian renewables as the country's electricity demand is likely to grow more than in any other major economy in the coming decades,” Karim Mourad, global head of infrastructure, at the sovereign wealth fund told AsianInvestor.
Also keen on the burgeoning sector, British Columbia Investments (BCI) along with Dutch pension fund APG are looking to invest in Mahindra Susten’s InvIT, which is planning to build a solar energy portfolio backed by long-term power purchase agreements, according to a report by the Economic Times of India.
The $190 billion Canadian fund, Ontario Teachers' Pension Plan Board has about a 30% stake in Mahindra Susten, which it acquired in September 2022 for $300 million.