Ambit Capital, the institutional equities and asset management vertical of Mumbai-based domestic investment bank Ambit Holdings Pvt. Ltd, has hit the fund raising mode for its $150-million Shariah-compliant fund. Ambit Capital CEO (Equities) Andrew Holland, who is spearheading the venture, is currently doing soft marketing of the fund to institutional investors and family offices in the Middle-East.
The Shariah-compliant fund will be jointly marketed by Ambit’s new investor, Qatar-based QInvest Llc. In February this year, QInvest paid Rs 250 crore to purchase a 25.01% stake in the operating company Ambit Corporate Finance. Qinvest is also coming on board as a sponsor or providing seed capital money to the fund. QInvest claims to the largest investment bank of Qatar, with an authorised capital of $1 billion and paid up capital of $750 million. Ambit is looking to leverage the global presence of QInvest to ramp up its foreign institutional sales and jointly market the new product offering in the world of Islamic Finance.
According to Holland, the fundraising strategy is coming along very well and “better than they imagined”. He added that there is a lot of awareness that has built about the macro drivers of emerging markets particularly like those of India and that there is no need to sell the India story now. Holland is of the view that this LP base in Middle East is a significant pool of capital and asserted that “inflows into India will be in a steady manner.”
Structured as an open-ended fund, this Shariah-compliant fund will only invest into public equities, with a focus on large cap stock and will look at sectors like IT, pharmaceuticals. Being schemes adhering to Shariah laws, the money generated will not be invested in any instruments that carry interest rates, like banks. Shariah-compliant funds are investment vehicles which are fully compliant with the principles of Islam. The funds are prohibited from making investments in industries related to gambling or alcohol.
Shariah compliant funds are gaining momentum in India. Apart from Ambit, early this year, Reliance Capital Asset Management's Malaysian arm announced the launch of its first Shariah-compliant products, including an India Fund. Islamic finance is being considered as a serious niche business for corporates.
Worldwide Shariah-compliant assets, including deposits at Islamic finance institutions, have been pegged at $950 billion by Moody’s but could grow to $1.6 trillion by 2012. Recently, Navis Capital, a firm specializing in making private equity investments in growth-oriented buyouts in South and Southeast Asia, closed its sixth fund at $1.2 billion, which also includes Shariah compliant investors.
“It opens the door to new type of investors. It’s got a fund raising and deal flow benefit,” Rodney Muse, co-managing partner of Navis Capital told VCCircle in an earlier interview.
Also, Abu Dhabi Investment House launched the Indian Entertainment City Fund, a $400-million Shariah compliant fund to invest into a mixed use real estate project in India in 2008. Shariah-compliant funds are increasingly being seen as a channel to tap the Gulf investors who are attracted by the Indian stock market. These companies also target local Muslims with deep pockets who don’t want to invest in stock markets due to lack of information on the subject or the perception that it is unlawful to invest in stock market. According to an LP, with an on-the-ground presence in India who did not wish to be quoted said , “there are a lot LPs in the Middle East, and some GPs want to target these funds”.