Finance Minister Nirmala Sitharaman’s Budget 2020 proposal to incentivize investment by Sovereign Wealth Funds of foreign governments in infra gives fresh impetus to Singapore Government-backed GIC’s larger strategy for the Indian market.
Singapore’s sovereign wealth fund GIC is the 8th largest sovereign wealth fund globally with estimated assets worth USD 440 billion. Privately owned by the Singapore Government, GIC eyes the Indian market as its next big revenue generator. Consequently, Union Finance Minister Nirmala Sitharaman’s proposal to incentivize investment by Sovereign Wealth Funds of foreign governments in priority sectors gives newly added impetus to its plans in India.
Set up in 1981, GIC marked its entry into the real estate sector in India in 2005. It struck a deal with Chennai-based residential developer XS Real. It is today one of the most dominant sovereign investment funds in India. GIC has made several private equity deals and large transactions in real estate. GIC is also active as an investor and limited partner for a number of Indian PE and VC funds.
How FM Nirmala Sitharaman’s Budget 2020 Proposal Gives Wings To GIC’s Ambitions
GIC has plans to infuse around USD 1 Billion in the infrastructure sector in India via an investment platform that will acquire projects for operating roads. As per the report, the said platform is part of GIC’s larger strategy to amplify its presence in real estate and infrastructure sector in India, an area where it sees a lot of potential.
The Finance Minister’s proposal during Budget 2020 speech aims to encourage foreign investments from funds like Singapore’s GIC in developing India’s infrastructure. It is also a positive endorsement for GIC’s larger plan for the country. The government proposes 100% of tax exemptions to investments in infra by sovereign wealth funds like GIC.
In her Budget 2020 speech, FM Sitharaman said that in a bid to “incentivize the investment by the foreign governments’ Sovereign Wealth Funds, I propose to grant 100% tax exemption to their interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors before 31st March 2024 and with a minimum lock-in period of 3 years.”
GIC’s Current Real Estate And Infra Investments In India
GIC already has a handsome investment footprint in real estate across India. It entered a strategic pact with Taj Hotels-backed Indian Hotels Company Ltd (IHCL) to make joint investments of USD 600 million (Rs 4,000 crore) in luxury hotels in India. GIC’s stake is at 70% whereas IHCL has 30%.
GIC also acquired “an unspecified minority stake” in property developer Provenance Land for an undisclosed amount. The developer is credited with introducing the Four Seasons brand in India. Further reports suggest that GIC is set for 50% stake in Provenance Land. It is building a luxury facility in Mumbai’s sea-facing Worli locality.
GIC is also a long-term investor with big gun property developer DLF. Their JV started in 2017 post the sale of promoted KP Singh & family 33.34% stake in DLF’s rental arm DCCDL to GIC for around $1.4 billion. DLF and GIC are building India’s largest mall (2.5 million square feet) in Gurugram as well as a 7-million square feet residential property around Central Delhi. DCCDL has also leased out 2 lakh square feet office space to Facebook in Gurugram.
GIC has also established an NBFC along with leading global investment firm KKR. It offers structured credit solutions in real estate in India. KKR has been active in structured financing in India since 2009 having backed 21 business groups with USD 2 Billion. It is also investing INR 44 billion for a 49% stake in IRB Infrastructure Developers’ investment trust for road constructions.
GIC also has interests in the Prestige Group’s rental arm where it has invested Rs 2,600 crore. It also has a minority stake in Godrej Properties via a Rs 1,000 crore deal. Furthermore, as part of a consortium, alongside Tata Group and SSG Capital Management, which invested 80 billion rupees ($1.16 billion) in GMR Airports Ltd. GIC holds a 15% stake in the company.
Investments Apart From Real Estate And Infra
GIC also has an interest in the Indian telecom sector. It is investing USD 713 million in Bharti Airtel in a bid to ease pressure on Singapore Telecommunications which holds 39.5% stake. The investment will give GIC 5% stake in the telecom giant.
In the energy sector, GIC, along with another foreign government sovereign wealth fund ADIA (Abu Dhabi Investment Authority), is investing USD 495 million in equity into Hyderabad-based Greenko. The deal valued the clean energy firm at USD 6 billion. It took AIDA-GIC joint investments in Greenko to USD 1.55 billion. GIC is the majority partner in Greenko with 61% stake, while AIDA has 15%.
Furthermore, GIC has also invested in the Walmart-owned Indian e-commerce giant Flipkart with an undisclosed sum. Likewise, another large investment part of the GIC India portfolio is with mortgage lender HDFC.
How The Incentivization Changes GIC’s India Approach
GIC has invested USD 2.5 bn in the Indian real estate sector in the last 4 years.
GIC India office refused to comment on the proposal. However, the policy announcement does give government-backed funds like GIC an edge over private players like US-based private equity (PE) giant Blackstone and the Canadian firm Brookfield.
Other foreign government-backed funds also stand to benefit from Nirmala Sitharaman’s Budget 2020 incentivization apart from Singapore’s GIC. These are Temasek Holdings which is also Singapore government-owned and the Abu Dhabi Investment Authority. Both Temasek and ADIA also have major investments in India’s infra.