Sovereign Funds Increase Investments in India Despite FIIs, PEs Being Cautious

MUMBAI: Major sovereign wealth funds like Singapore’s GIC Holdings, Abu Dhabi Investment Authority (ADIA), and Kuwait Investment Authority have significantly boosted their investments in Indian stocks and startups in recent years. Together, these funds held nearly ₹5 trillion ($60 billion) in Indian stocks as of March 31, with ₹2.57 trillion ($30 billion) invested in the past three financial years.

Sovereign funds are intensifying their investments in India while global private equity firms and venture capital funds are more cautious. This surge in interest comes as foreign institutional investments taper off, though analysts expect a rebound in FII flows in the latter half of the year. FIIs sold ₹146.29 crore worth of Indian equities between January 1 and July 2.

The inclusion of Indian sovereign bonds in JPMorgan Chase’s global debt indexes is likely to attract more sovereign funds. Recently, ADIA invested in Emcure Pharmaceuticals’ IPO and is considering a stake in Haldiram Snacks Food with Blackstone. ADIA also invested ₹1,400 crore in the beauty startup Purplle and plans to invest ₹2,001 crore in Prestige Group’s real estate projects with Kotak AIF.

GIC is particularly aggressive, holding ₹2.5 trillion in Indian stocks, including major investments in HDFC Bank, Reliance Industries, ICICI Bank, Bajaj Finance, and Larsen & Toubro. The Kuwait Investment Authority and Norway’s Norges Bank also hold over ₹1.5 lakh crore in Indian stocks.

Experts see India as a key opportunity for sovereign wealth funds. V. Jayasankar of Kotak Investment Banking noted that these funds have increased their investment rates over the last few years and this trend is likely to continue. ADIA is setting up a $4-5 billion fund to invest in India through GIFT City, a tax-neutral finance hub in Gujarat.

Sovereign funds are also increasing investments in private companies. Last year, ADIA invested in Lenskart and Greenko Group, bringing $21.6 billion into India from 2019 to 2023. GIC invested $16.7 billion during the same period, backing companies like Ather Energy, Atlan, and Sterlite Power. Mubadala Investment Company and Qatar Investment Authority have also made significant investments in India.

Kashyap Chanchani of The Rainmaker Group emphasized that Indian founders appreciate investors with lower capital costs and longer investment horizons, while sovereign funds find favorable opportunities in private markets.

Bankers and industry experts believe India is in a favorable position for these investors, with inflows expected to increase over the next 5-7 years. Neha Agarwal of JM Financial highlighted that India’s political stability and significant reforms have attracted substantial capital from sovereign wealth funds. These funds are also increasingly participating in IPOs to build stakes in high-quality, profitable companies early on.

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