Rana Talwar's Sabre Capital, which played the White Knight for Centurion Bank two years back, is gearing up to play a bigger role in the Indian equity market.
The former Standard Chartered Bank CEO has teamed up with Singapore's Tamasek Holding to float a fund that will invest up to $5 billion in Indian equities as well as fixed income instruments over the next five years.
This is the largest commitment by an overseas fund to Indian markets.
US-based Capital and the Government of Singapore Investment Corporation have had the largest exposure to India so far -- around $2 billion each.
"Both Tamasek and the Government of Singapore have huge funds in their kitty. But they have not been able to invest in Indian markets. Talwar's fund may also invest in private equities apart from the listed market and debt instruments as otherwise it may find it difficult to deploy so much money. Besides, an overseas fund's exposure to fixed income securities is not unlimited," pointed out a fund manager.
Alexandra Fund Management, owned by Tamasek, has signed a memorandum of understanding with Sabre Capital, to set up an asset management company for investment in India.
Incidentally, Tamasek had earlier floated an India-dedicated fund -- $100 million Merlion India Fund -- along with Standard Chartered Private Equity.
The Sabre-Temasek fund is expected to be operational by the end of this year. Its focus areas will be pensions and insurance.
Sources said it would set up a national distribution network to sell to small investors and leverage the global brands of the two partners to ensure the flow of large offshore funds into the Indian market.
Sabre Capital holds a 5.6 per cent stake in Centurion Bank through two vehicles. It is in the process of merging another new private bank, Bank of Punjab, with itself. Talwar will be the chairman of the merged entity. He had earlier said he would be open to the idea of picking up weak banks and nurse them back to health.
Talwar has all along been gung-ho about India. According to the Standard Chartered CEO, India was one of the five globally important markets on this radar screen along with China, Hong Kong, Singapore and Malaysia.
"Going beyond the banking sector, he now wants to write a different India story. The latest agreement between India and Singapore will help him to a great extent in playing a new role," said a fund manager.
Indian mutual funds have around Rs 1,70,000 crore (Rs 1700 billion) worth of assets under management. Foreign institutional investors have so far invested about Rs 1,50,000 crore (Rs 1500 billion) in Indian equity markets. Analysts see the Rs 3,20,000 crore (Rs 3200 billion) investment in equity markets doubling over the next five years.
The Securities and Exchange Board of India was earlier lukewarm to the Sabre proposal to enter the asset management business in India.
Samir Arora, who was tipped to head the fund, was charged with financial irregularities. He was later cleared of the charges. He is now planning to set up an offshore investment vehicle focused on India.
The market surge in India has been attracting FIIs from across the globe. The latest latest foreign-owned mutual fund to set shop in India is Fidelity, the US money manager.
Operationalise the fund by year-end
Focus on pensions and insurance
Set up a distribution network to sell to small investors
- Leverage the brand equity of partners to ensure flow of large offshore funds into India