MUMBAI: After partnering with storied brick-and-mortar names such as Larsen & Toubro and Bharti, the Canada Pension Plan Investment Board (CPPIB) is looking to back emerging champions across financial services, healthcare, commerce and education that are overlaying technology to define and determine fast-changing consumer habits.
The confluence of rising aspirations and spending power, undergirded by cheap data and information, is throwing up new investment opportunities such as Byju’s as one of the world’s biggest pension plans to tap fast-growing pockets for greater returns. The fund is seeking to allocate a third of its corpus to the emerging markets of China, India, Brazil and pockets of South East Asia in the next six years.
“India currently is 2% of our portfolio. We do not want to box ourselves in with specific targets, but as our fund sizes grow, India will continuously see more deployment and outlay,” said Alain Carrier, CPPIB’s head of international operations. “In emerging markets such as India, we prefer partnering with a local player or backing the right management team. This will continue to be a dominant theme, though we may make a few exceptions.”
Compared with China, Carrier sees India as far more receptive toward foreign capital. The $351-billion fund (as on FY18), for example, has stayed away from investing in Chinese infrastructure. On the flip side, however, hunt for the best partner, depth of the market to absorb large capital, and valuations are drawbacks unique to India, Carrier believes.
Over the past decade, CPPIB has invested C$8.2 billion in India (as of December 31, 2018) with a focus on infrastructure, real estate a ..
Much like its peers from Canadian pension funds, CPPIB is known for being a proponent of “direct” investments, where it bypasses intermediaries to make deals or buyouts. In India, too, it is open to taking larger bets, some even in existing portfolio companies such as Renew, the Goldman Sachs-backed clean energy platform, where it already has a minority stake.
Explaining the investment thesis in India, Vikram Gandhi, an adviser to the fund, said that broadly it can be categorised into two – growth and yield generating. While bets on Kotak Mahindra, its largest in India so far, and Byju’s would be centred around the first goal, those focused on real estate or infrastructure assets such as roads and malls would largely leverage steady annuity or rent incomes.
“Long-term pension capital should be seeking out assets with less volatility and greenfield risks,” said Gandhi.
As the head of infrastructure investments, Carrier was instrumental in CPPIB’s first investment in India’s infrastructure sector, putting $332 million to work in Larsen & Toubro Infrastructure Development Projects Limited, which owns the largest toll-road concession portfolio in India.