Saudi Arabia’s sovereign wealth fund, Public Investment Fund (PIF), has stepped up its India strategy to mint investment opportunities in the infrastructure sector, said two officials aware of the development.
PIF, the kingdom’s main investment arm, has assets of around $600 billion under management, and building “strategic economic partnerships” is one of its core objectives. The fund is looking to scout for opportunities in India after high global crude oil prices shored up Saudi Arabia’s revenue, with the world’s largest oil company, state-run Saudi Arabian Oil Co. (Saudi Aramco), targeting investments in the green energy space.
“PIF is bullish on India and is looking to invest around $4 Billion over 3 years primarily in the real estate sector,” one of the two officials said, seeking anonymity. According to the officials, Saudi PIF is collaborating with an India-based consultancy firm to facilitate the investment.
With the Indian government looking to attract investment of ₹111 trillion ($1.38T) for 7,000 infrastructure projects, New Delhi prefers sovereign wealth funds, or impact investors, which invest for the long term to generate modest yields.
In the FY21 Union budget, India had extended tax exemptions to sovereign wealth funds on their earnings from infrastructure investments in India for FY24. “In order to incentivize the investment by sovereign wealth fund of foreign governments in priority sectors, finance minister Nirmala Sitharaman proposed to grant 100% tax exemption on interest, dividend, and capital gains income in respect of investments made in infrastructure and other sectors before 31 March 2024, and with a minimum lock-in period of three years,” the government said in a February 2020 statement.
The government has also raised capital expenditure for FY23 by a record 35% to ₹7.5 trillion ($93.8B), with a majority of the capex expected to back infrastructure projects.
Some active sovereign wealth funds in India’s infrastructure space include Abu Dhabi Investment Authority, the UAE’s Mubadala Investment Co. and Singapore’s GIC Holdings Pte Ltd and Temasek Holdings Pte.
PIF has been looking to invest in India and has been scouting for opportunities, including buying a stake in Tata Power Co. Ltd’s green energy business. A consortium led by the world’s largest asset manager BlackRock and Mubadala agreed to invest ₹4,000 crore for a 10.53% stake in Tata Power Renewables, the companies said in a joint statement earlier this month.
More than 12 foreign investors have so far secured tax exemptions for infrastructure investments in India under a provision introduced in the Finance Act, 2020, which took effect on 1 April 2021. These include Singapore- based sovereign wealth funds Chiswick Investment Pte. Ltd, Stretford Investment Pte. Ltd, Dagenham Investment Pte. Ltd, Anahera Investment Pte. Ltd, Bricklayers Investment Pte. Ltd, and the UAE’s sovereign wealth fund MIC Redwood 1 RSC Ltd. Canadian and Australian pension funds also secured tax breaks under this provision.
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