Caisse de dépôt et placement du Québec (CDPQ), North America’s largest pension fund manager, has signed an agreement with Edelweiss Group to invest about Rs 5,000 crore (around $750 million) over four years that will provide the Indian firm with capital to invest in stressed assets in the country.
CDPQ will also be acquiring a 20% equity stake in Edelweiss Asset Reconstruction Company (EARC).
CDPQ targets annual investments of $150-175 million in stressed assets and specialised corporate credit, totaling around $600-700 million over a four-year period, it stated.
CDPQ will sit on EARC’s board of directors and on the Edelweiss Group investment committee, overseeing private debt and stressed assets investments.
The partnership aims to channel between $1.8 billion and $2 billion (including $600-700 million put in by CDPQ as well as investments from Edelweiss Group and other international institutional investors) into private debt and restructuring of stressed assets in the country.
The platform would invest in assets with the aim of restructuring debt and turning around companies, as well as to provide finance to Indian entrepreneurs and firms.
The investments, to be carried out by Edelweiss ARC and through different Edelweiss funds, would buy non-performing loans from Indian banks and invest in private debt of growing Indian companies.
Michael Sabia, president and chief executive officer at CDPQ, said through the partnership, CDPQ is looking to support its growth for many years to come and participate in the emergence of innovative and successful businesses in India.
“We believe India stands out as an exceptional country to invest in, given the scope and quality of investment opportunity, and the current government’s intention to pursue essential economic reforms,” he said.
Rashesh Shah, chairman and CEO, Edelweiss Group, said, “Recent reforms, like the Bankruptcy Act, have the potential to transform the pace of reconstruction and resolution in India’s stressed and distressed market, thus creating a much larger opportunity”. The partnership would help finance, restructure and grow financially viable businesses in India, he added.
EARC has around $4.5 billion in assets under management and recently set up a consulting team providing value-addition and operational improvements to industrial businesses to enhance productivity.
In addition to CDPQ’s proposed 20% stake, the other shareholders in EARC include a Scandinavian insurance company with a 4% stake. Around 16% will be held by Indian investors and the balance will be owned by the Edelweiss Group.
With an Indian office opened in New Delhi in March 2016, CDPQ managing director for South Asia Anita Marangoly George would be involved in identifying the investment opportunities in the South Asian markets, it said.
CDPQ manages funds primarily for public and para-public pension and insurance plans. As on 30 June, 2016, it held $254.9 billion in net assets with investments in financial markets, private equity, infrastructure and real estate.
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