ADIA bets on infra & financial services

The sovereign wealth fund has invested $1.3 billion in India

What’s common between the initial public offerings (IPOs) of Eris Life Sciences, ICICI Lombard, SBI Life Insurance and Security & Intelligence Services (India)? The Abu Dhabi Investment Authority (ADIA) was an anchor investor in all these IPOs, stepping on the gas in India.

ADIA, which invests on behalf of the Government of Abu Dhabi, has not only been investing in listed equities, but also putting a lot of its private equity (PE) to work to build its India portfolio.  In the past, ADIA has invested in HDFC Bank, Kotak Mahindra Bank, Reliance Capital,  TTK Prestige and Parag Milk Foods, investing over $1.25 billion across 15 deals, according to the VCCEdge data. Barring HDFC Bank, it has partially exited all these investments. 

Last week, the sovereign wealth fund also bought a minority stake in KKR India Financial Services for an undisclosed sum. 

The firm lends to mid-market companies across sectors. With this deal, it has made four investments in financial services.

In the past few years, ADIA has focused more on infrastructure, investing $191 million in ReNew Power Ventures (2015), $150 million in Greenko Energy Holdings (2016) and $300 million in Cube Highways and Infrastructure (2017), a platform company formed by PE firm I-Squared Capital and International Finance Corporation. 

Cube Highways owns and operates more than 1,300 lane-km of highways in India and also manages a diverse portfolio of toll and annuity-based roads. 

The infrastructure bets are in line with ADIA’s recent commitment to invest $1 billion in the National Investment and Infrastructure Fund (NIIF).

Abu Dhabi has become a strategic partner to Prime Minister Narendra Modi’s efforts to woo foreign investments. ADIA is expected to bid aggressively for 50 highway auctions under the new toll-operate-transfer (TOT) system. 

It has built strong relationships with key partners in the NIIF and is jointly exploring investment opportunities across a range of sub-sectors. ADIA will also pursue investments outside the scope of the NIIF, and may pick minority stakes in high-quality Indian companies along with reputed partners.  Founded in 1976, ADIA is a globally-diversified investment institution that invests funds on behalf of the Government of Abu Dhabi for long-term returns. 

It invests across asset classes: Equities, bonds, credit, alternatives, real estate, private equity, and infrastructure. It has generated 6.9 per cent return over 30 years.

The sovereign wealth fund invests across geographies, but a bulk of it in North America (35-50 per cent), Europe (20-35 per cent), emerging markets (15-25 per cent) and developed Asia (10-20 per cent); the two figures represent the minimum and the maximum allocation for a geography. 

ADIA replaced an earlier institution, the Abu Dhabi Investment Board, which had been formed in 1967 to oversee the activities of London-based external fund managers who were tasked with investing the budget surpluses from Abu Dhabi’s recently-commenced oil production into global markets.