Of late, Canada Pension Plan Investment board (CPPIB) has been very active in India?s infrastructure and banking sectors. It struck alliances with Shapoorji Pallonji and Piramal Enterprises (PEL) earlier this year, followed by investments in Kotak Mahindra Bank and L&T Infrastructure Development Projects this month. Andre Bourbonnais, senior vice-president, private investments, CPPIB, in an interview with Nitin Shrivastava, says investing in India fits well with the board?s long-term strategy and it would continue to seek opportunities in infrastructure and financial services. Excerpts
You have added India to your investment programme as a new emerging market this year. What drove this move?
As Asia?s third-largest economy, India is a key long-term growth market for CPPIB, aligned with our strategy of seeking investments in emerging markets that, we believe, will deliver attractive long-term risk-adjusted investment returns. India?s development needs, and CPPIB?s investment strategy and mandate, provide a very good match.
CPPIB made its first active investment in India in 2010 through a stake in the Multiples Private Equity Fund. As a disciplined and patient long-term investor, CPPIB continued to assess the Indian market to carefully choose the right investment opportunities and partners who would be aligned with our investment goals. We are pleased that we have been able to find a number of such opportunities in recent months.
What?s your assessment of India?s real estate market?
CPPIB views India as a good fit with our long-term investment strategy, and real estate was one of the areas we wanted to explore in India. Our first direct investment in India was with Shapoorji Pallonji, which provided us an excellent opportunity to form an alliance with an experienced and well-aligned developer, with a proven track record.
Our second direct investment allowed us to establish a presence in India?s residential market with PEL/Indiareit, who have a strong track record in the sector. It allowed us to grow our overall real estate exposure in India.
this week, you formally made your first investment in India?s infrastructure sector with a capital of CAD 180 million. What led you to invest in L&T IDPL?
We recognise that India is hoping to attract big infrastructure investments. We have been investing in India since 2010 and are always in discussions with various parties about potential investments. We felt
this was an attractive opportunity to build our infrastructure platform
in India alongside an experienced partner.
Though CPPIB has equity investment holding of over CAD 500 million in nearly 78 Indian listed firms (as of March 2014), apart from the recent investment of CAD 360 million in Kotak Mahindra Bank, its investments in IT and banking firms have been higher. What?s your outlook on India?s banking sector?
The investments we have made in listed firms (apart from our recent investment with Kotak) are part of our passive portfolio, which replicates a number of global equity and bond indices. As such, these are not active investments on CPPIB?s part.
As you note, we?ve recently invested in Kotak Mahindra bank. Our outlook on the banking sector is favourable. CPPIB is a long-term investor and believes that given the low penetration of financial services in India there are opportunities for growth in the sector. Financial services is an industry we continue to remain interested in.
What?s your view on the macroeconomy with respect to growth and investment climate?
India presents good opportunities for CPPIB because of its strong long-term fundamentals ?such as a growing middle class and rapid urbanisation ? which bring a need for increased investment in infrastructure and real estate, among others. We will continue to seek opportunities in India that meet our investment criteria.