The Canada Pension Plan Investment Board (CPPIB) and Caisse de dépôt et placement du Québec (CDPQ) have halted some of their investments in India as Canada’s top two pension funds evaluate the impact of covid-19 on businesses in Asia’s third-largest economy.
Three people aware of the developments said CPPIB has suspended its ₹1,400 crore investment in an arm of Mumbai-based logistics firm JM Baxi.
Separately, CDPQ has put on hold its planned purchase of a portfolio of seven toll roads from Global Infrastructure Partners (GIP), its first acquisition of a roads portfolio in India, as the two parties could not reach an agreement to close the transaction within agreed timelines, the people said, requesting anonymity.
Collectively, these two pension funds have more than $500 billion in assets under management and are among the most bullish institutional investors in India, having made numerous investments in both public and private markets, including setting up large platforms for investments in India’s infrastructure sector.
A pause in investments by these major pension funds reflects a mood of risk aversion among institutional investors, which are now focusing more on protecting their existing investments instead of making more capital commitments.
“We do not see these large institutional investors making too many fresh commitments in emerging markets in the next three to six months. Their portfolios have seen markdowns due to the pandemic and they have shifted focus on investments in their home countries and other developed markets; geographies that they are more comfortable with," said the managing partner of a large domestic private equity fund, speaking on the condition of anonymity.
Mint reported on 12 March that JM Baxi is in the final stages of talks to raise ₹1,400 crore as equity from CPPIB. The investment was planned for a 35% equity stake in International Cargo Terminals and Rail Infrastructure Pvt. Ltd, a Delhi-based subsidiary of the JM Baxi Group which handles certain port terminals and infrastructure business.
“The investment is on hold for the time being as CPPIB wants to wait and see how covid-19 affects international trade. With the global economy poised for a bad year, international trade is bound to be badly hit this year. Additionally, people are talking about realignment of supply chains as some companies are looking to move out of China. How these variables play out is yet to be seen," said the first person cited above, speaking on the condition of anonymity as he is not authorized to speak with the media.
CDPQ had last year agreed to buy Highway Concessions One, a portfolio of seven toll road assets, from GIP for about ₹2,400 crore.
However, the deal could not be closed within agreed timelines and the two parties are likely to renegotiate the transaction, said a second person cited above, also requesting anonymity.
“The deal was supposed to close by the end of March, but it did not. The lockdown has hit toll roads hard and one is not sure on how long it will take for the numbers to go back to pre-covid levels. This has created a lot of uncertainty for toll road deals," he added.
CPPIB, CDPQ, GIP and JM Baxi declined to comment.