New Delhi: As a proposal to set up its own overseas investment arm gathers dust somewhere among the heap of files, India conceded further ground to another emerging Asian powerhouse China, which today announced an investment worth up to $13.5 billion in UK’s banking giant Barclays.
This comes within two months of China announcing an investment of $3 billion from its trillion-dollar forex kitty for a 10% stake in the US-based global private equity giant Blackstone.
Along with China’s investment in Barclays, which would be done through China Development Bank, Temasek Holdings, the investment arm of the Singapore government, has also agreed to invest up to about $5 billion in the British bank.
Both CDB, which is mainly engaged in domestic infrastructure investment by extending loans in support of government policies, and Temasek would become major shareholders in Barclays with a 7.7 and 3% stakes each.
Part of their investment would be also used for the British bank’s proposed $93-billion takeover of ABN Amro.
While Temasek has already created a niche for itself with a portfolio of over $80 billion spread across the world, including India, Singapore government also has a dedicated investment arm to manage its forex reserves in the name of General Investment Corp (GIC).
The suit has been followed by China as well, whose forex reserve investment agency invested $3 billion in global private equity giant Blackstone last month, thus getting exposure to various countries where the US-based PE powerhouse has assets worth about $14 billion, including some in India.
Temasek has holdings in over a dozen Indian companies including ICICI Bank, while Blackstone has also allocated one billion dollars for investment in India, besides investing in the domestic media house Eenadu group.
Earlier last year, a proposal is understood to have come from IDFC for setting up a special purpose vehicle that would garner resources from domestic market and invest in the companies through FDI route or by picking up strategic stakes on the lines of Temasek and other such agencies.
However, the idea is yet to be given shape, even though countries like China and South Korea have gone ahead with setting up their global investment arms.
In May this year, the Chinese authorities decided to invest $3 billion from their $1.2-trillion forex reserves in Blackstone, which was followed by a debate on whether India should follow suit, even though its forex kitty is relatively small at about $200 billion.
Meanwhile, there have also been proposals for using the forex reserve for domestic infrastructure projects.
However, the proponents of the overseas investment theory argue that with the current appreciation in rupee against the US dollar and other major foreign currencies, the forex reserves could be better utilised with relatively higher returns by way of overseas investments.
While Temasek and the investment arms of other countries such as UAE and Kuwait have been long benefiting from their investment in other countries, China too has gained a significant edge over India now by its investment in firms like Blackstone and Barclays.
These are the companies that give an investor a global play through their diversified presence and portfolios, they argue.