SBI, Russian sovereign wealth fund to set up $2B joint investment fund

The State Bank of India (SBI) and the Russia Direct Investment Fund (RDIF), a Russian sovereign wealth fund, will set up a $2 billion co-investment consortium to explore growth opportunities and asset acquisitions in both countries.

Each side will invest up to $1 billion into the fund and a Memorandum of Understanding (MoU) is getting signed as part of Russian President Vladimir Putin’s official visit to India on Monday.

The proposed Indo-Russia Joint Investment Fund will tap the opportunities in the Indian infrastructure space, believed to be more than $1 trillion, and also in the Russian disinvestment programme to further strengthen the bilateral ties, SBI said in a statement.

The fund is expected to operate as an ideal vehicle to route and manage strategic investments by Indian companies with interest in hydro-carbon assets, diamond and other mineral assets in Russia, should they decide to form consortia for acquiring stakes in the federal assets being privatised.

RDIF is a $10 billion fund, established by the Russian government to make equity investments primarily in the Russian economy. “The Russian Direct Investment Fund was created in 2011 by President Dmitry Medvedev and Prime Minister Vladimir Putin, and is managed by Kirill Dmitriev, chief executive officer of the RDIF, since inception,” the RDIF site stated.

Earlier this year, RDIF entered into a similar partnership with China Investment Corporation, a $500 billion sovereign wealth fund and China’s largest SWF, for setting up a $10 billion PE fund.

SBI is one of the leading project finance providers in India and brings its local infrastructure market expertise to the joint venture.

This is the third PE fund initiative undertaken by the SBI and the bank will pursue similar ventures in the near future.

In a similar development in 2010, SBI and the State General Reserve Fund of Oman (SGRF) signed an agreement to form a joint investment fund during a visit from an Oman minister. The Oman-India Joint Investment Fund reportedly had a corpus of $100 million, to be contributed equally by the SGRF and the SBI. The fund aims to explore opportunities across all sectors, without any specific preference.

Earlier in 2008, SBI set up another fund called Macquarie SBI Infrastructure Fund (MSIF), which is an unlisted PE-style infrastructure fund with approximately $910 million of committed capital. MSIF provides its investors (located outside India) access to the growing number of investment opportunities available in India’s infrastructure and infrastructure-like assets.

MSIF is managed by a joint venture between Macquarie Capital Group, the State Bank of India and the International Finance Corporation.

(Edited by Sanghamitra Mandal)

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