Pension fund has invested $1.1 billion across four transactions in the past six months, the highest by a pension fund in India
Mumbai: Canada Pension Plan Investment Board (CPPIB) has emerged as the largest pension fund investor in the Indian infrastructure sector and plans to continue to expand its presence in the country.
The pension fund, the world’s seventh-largest by assets under management, has invested $1.1 billion (around ₹ 6,600 crore) across four transactions in the past six months, the highest by a pension fund in India.
The pension fund is looking to open its India office in Mumbai in the next 6-9 months and intends to do transactions directly in the next 12-18 months, according to three people directly involved with the development.
“They are looking to hire a head each for real estate and infrastructure investments in the country. In the next year and a half’s time it wants to directly do deals on its own. At present the operation is run from London," said a fund manager, who was approached for the role to head its real estate initiatives in India. He requested anonymity.
CPPIB’s Indian investments comes at a time when investors are expecting the Bharatiya Janata Party (BJP)-led government to revive growth and investments in the economy. Attempts to revive stalled infrastructure projects are also underway. A near stagnation of investments in the economy has been cited as one of the reasons behind the sharp fall in GDP growth rates to below 5% for two consecutive years.
In response to an email questionnaire, CPPIB declined to comment on recruitment efforts or potential office openings. The fund, however, said that India remains a key market for investments.
“India is a key long-term growth market for CPPIB and presents good opportunities for CPPIB because of its strong long-term fundamentals. We will continue to seek investment opportunities in India which may include direct investments that meet our investment criteria," said Mark Machin, head of international, president, CPPIB Asia in the email. Since 2012, CPPIB’s transactions in India are managed by Vikram Gandhi, founder and chief executive officer of VSG Capital Advisors Pvt. Ltd. “Vikram is a valuable adviser to CPPIB in India and has helped us as we expanded our investments in India. We will continue to work with Vikram to assist us in rolling out our investment strategy in India," said Machin.
Gandhi didn’t respond to an email seeking comment.
“In the first phase, institutional investors came in as part of the third-party managed funds. But in the real estate and infrastructure asset class, not many have returned capital to their investors for various issues, which is why now pension and sovereign funds have started thinking that going directly or through co-investments is a better idea," said Ambar Maheshwari, managing director-corporate finance at property consultants Jones Lang LaSalle India.
According to Machin, CPPIB is now adopting a “smart partnership" approach in India.
“This means that we look for local partners who we can work with for the long-term, whom we can scale up with over multiple cycles and are among the very best in class at what they do" said Machin.
The first such tie up was announced on 28 November 2013, with construction firm Shapoorji Pallonji Group, for investments in commercial real estate developments. CPPIB will own 80% of the venture with an initial equity commitment of $200 million.
This was followed by a $500 million real estate financing venture with Piramal Enterprises Ltd in February 2014. Each party committed an investment of $250 million to the venture. The fund, which is offering financing to residential real estate projects, is about to close its first investment in the next 45 days.
“We are in advanced stage of closing the first deal and it should be done in next 45 days. We plan to close 4-5 transaction in a year’s time from now." said, Khushru Jijina, managing director, fund management at Piramal Enterprises in an interview on 4 July.
CPPIB has also started to make inroads into the pure play infrastructure space.
On 23 June, India’s largest engineering and construction company Larsen and Toubro Ltd said CPPIB has agreed to invest ₹ 2,000 crore in its unlisted subsidiary—L&T Infrastructure Development Projects Ltd. This is the first direct private investment by a Canadian pension fund in an Indian infrastructure development company.