MUMBAI: Caisse de Dépôt et Placement du Québec (CDPQ), the second-largest pension fund in Canada, is set to commit nearly half a billion dollars in India this week in two separate investments, reaffirming the increasing interest of Canadian institutional money managers in the subcontinent.
CDPQ has agreed to acquire close to 30% in the asset reconstruction company of Edelweiss Securities for about $250 million in a deal that will value the stressed assets manager at $750 million. A formal announcement is due on Monday.
ET reported on September 14 that Edelweiss ARC was in advanced talks with three funds, including CDPQ for an investment.
Additionally, the Canadian fund is also in the final stages of negotiations to acquire a 42% stake in south-based TVS Logistics Services Ltd for about $180 million cashing in on a sectoral boom driven by e-commerce.
CDPQ will acquire shares held by US private equity giants KKR & Co LP and Goldman Sachs Inc., multiple sources with direct knowledge of the transaction told ET.
KKR invested Rs 268 crore in TVS in April 2012 while Goldman invested Rs 120 crore in two tranches beginning 2008.
KKR and Goldman Sachs declined to comment. Edelweiss and CDPQ did not respond to emails seeking comment.
Edelweiss ARC is the biggest player in the stressed assets space with a 40% market share. In March, CEO Siby Antony told PTI that the company was looking to raise funds and had been approached by some funds.
ET reported on January 29 that KKR and Goldman were looking to exit their investments in TVS and had mandated JM Financial to run a formal process, which saw interest from bulge-bracket private equity funds such as Blackstone and Bain Capital and sovereign funds like Temasek and some strategic investors including Nippon Logistics.
Both KKR and Goldman Sachs own 21.6% each in TVS Logistics while Tata Capital has a 6.98% stake. TVS & Sons holds 40.76%, while the promoter family of the TVS Group controls the rest.
TVS Logistics, one of the largest third-party logistics players in the country focusing largely on the automotive sector globally, was launched as a business unit of TV Sundaram Iyengar and Sons Ltd but was turned into a separate unit in December 2004.
With a spate of 15 acquisitions, 12 of them overseas, TVS Logistics has become a global player spread across Asia, Europe, and the US with over 100 blue-chip companies as clients in 50 countries.
According to an ICRA note, on a consolidated basis, the operating income of the company grew to Rs 4,347.7 crore in the year to March from Rs 3,127.4 crore.
Till recently, the focus was largely overseas but after acquiring Drive India Enterprise Solutions Ltd (DIESL) from the Tata Group last August, the company is consolidating its domestic presence.
CANADA CONNECT
CDPQ, which opened its India office in March, has made a commitment of $150 million in the country’s renewable sector.
Together with sovereign wealth funds State General Reserve Fund of Oman (SGRF) and Kuwait Investment Authority, it teamed up with Tata Power and ICICI Venture last month to create a joint platform to acquire distressed and stranded power assets.
The three global investors will together deploy around $650 million of equity to create a dedicated pool of $850 million, making it one of the largest commitments from sovereign wealth funds and pension capital in the country so far. CDPQ is also looking to invest directly in the renewable energy space and is in talks with solar energy developer Azure Power to buy up to 35% of the company for about $180 million (Rs 1,200 crore), people close to the development said.
The likely investment in Edelweiss ARC comes after the government in May relaxed the regulation and allowed 100% foreign direct investment (FDI) in ARCs under the automatic route.
The investment though is subject to some conditions like stipulation on paid-up capital. Industry trackers say the changes in the FDI policy on asset reconstruction companies was expected to yield results.
According to a research report by law firm Nitish Desai & Associates on foreign direct investment in asset reconstruction companies, while distressed investments were on the rise, these were structured through alternate modes of investment, such as equity-linked instruments or debt-based equity tickers.
“The investments in ARCs remained substantially low since enforcement of security interests under the ARC route meant reliance on domestic partners, which foreign investors were not comfortable with,” the research report said.
Anita Marangoly George heads CDPQ’s South Asia operation in Delhi. Established in 1965, CDPQ’s net assets were pegged at $254.9 billion on June 30.
Canadian fund managers have been making huge bets in India with Brookfield and Canada Pension Fund Investment Board (CPPIB) leading investments.
After pumping $2 billion into India since 2009-10, Brookfield is planning to invest $2 billion more over the next two-three years.
CPPIB has made investments of nearly $2 billion in infrastructure, real estate, and renewable energy.
