Government Fund Weekly News Roundup: SWFs Target Indian Real Estate, Finance and Tech

March 18, 2016 by SWC Editors

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Construction in Mumbai

In the news this week: Sovereign wealth funds continue to invest in India across a range of industry sectors. Government funds finally close on a deal for Australian infrastructure company Asciano. And Italy and Iran discuss a joint venture.

Indian Investments

Have the BRICS hit the wall? Brazilian President Dilma Rousseff’s administration is dealing with a corruption scandal — and the country’s worst recession in 25 years. Russia continues to reel from the one-two punch of Western economic sanctions and low oil prices. Concerns are growing over the size of China’s public debt. And in South Africa, the rand has plunged amid fears over the stability of President Jacob Zuma’s government.

The exception is India, which looks a picture of good health in comparison. Since taking office in 2014, President Narendra Modi has presided over a period of strong economic growth — according to figures from India’s Ministry of Finance, Indian GDP will rise between 7 percent and 7.5 percent over the coming fiscal year — thanks in part to surging inward investment. Government funds are among the foreign institutions buying Indian assets, attracted by the country’s political stability and robust economic fundamentals.

Temasek Holdings, for example, continues to add to its portfolio of investments in Indian technology companies. Singapore's state investor has reportedly bought a 5 percent stake in Indian technology startup BillDesk for $30 million, investing alongside New York-based private equity firm General Atlantic, which paid $120 million for 20 percent of the company. The sellers were two U.S.-based venture capital firms: ClearStone Venture Partners and TA Associates. BillDesk develops software that enables clients to process online payments.

Meanwhile, the Canada Pension Plan Investment Board (CPPIB) has signed an agreement with Mumbai-based Kotak Mahindra Bank to invest in distressed assets across India. CPPIB and Kotak will together invest up to $525 million in the sector, with the Canadian fund contributing $450 million of that amount. The partners plan to provide financing to struggling companies and to invest in distressed-asset sales by banks.

The Abu Dhabi Investment Authority prefers to target large-scale real estate and infrastructure investments in India. This week, Hines India Real Estate, the Emirati fund’s $250 million joint venture with the Indian unit of American property developer Hines, provided local developer Conscient Infrastructure with $60 million to build a new premium housing complex in the city of Gurgaon, a growing financial and industrial hub.

Asciano Deal

Government funds have long been vying for Sydney-based railway and seaport operator Asciano. But after seven months — and more dramatic twists than an episode of Neighbours — a deal for the Australian company is finally nearing completion.

Toronto-based infrastructure group Brookfield Asset Management and Sydney-based logistics company Qube Holdings had been battling for the company as the leaders of separate investor groups. But in early March, the two parties resolved to end their rivalry and join forces.

This week, the two firms and their respective deal partners — which include several government funds — submitted a joint offer for Asciano that values the company at A$12 billion ($8.9 billion). Under the terms of the proposal, Asciano's rail and seaport operations would be divvied up among the members of the two consortiums, which include CPPIB, China Investment Corp., Singapore’s GIC and the Qatar Investment Authority. Asciano’s board recommended the offer to shareholders on March 15, and the deal could be completed by June.

Italy and Iran Mull Joint Venture

Italy’s Fondo Strategico Italiano (FSI) and the National Development Fund of Iran (NDFI) are reportedly set to establish a new joint investment fund worth $2 billion.

FSI's CEO Maurizio Tamagnini led a delegation to Iran this week and discussed the project with Safdar Hosseini, chairman of NDFI. Tamagnini told reporters that the plans for the joint fund may be finalized during Italian Prime Minister Matteo Renzi's upcoming visit to Tehran.

FSI has already formed several joint ventures with other state-owned institutions, while NDFI is planning to become more active in its investments following the lifting of Western economic sanctions on Iran in January.

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