Islamic investors now train their sights on India, China
Robust growth, requirement for huge investment in areas like infrastructure and strong legal framework are some of the reasons why Islamic investors are flocking to India.
By Shailesh Menon, TNN |
MUMBAI: Shifting political sands in America and Europe, especially after the 9/11 terror attack and concerns of a probable slowdown in developed economies are encouraging Islamic investors to turn their focus into growth economies like India and China.
Although there has always been talks of Islamic investors shifting their investment focus to emerging economies, the real trend of investing in India caught up in 2007. If one goes by numbers, the first real ‘all-Islamic’ finance deal materialised in October 2006 when Bahrain-based Gulf Finance House and the Maharashtra government joined hands to take up the Energy City India project. Gulf Finance House promised to invest close to $2,000 million for the project. Since then, there has been four major Islamic private equity investments in India all in 2007.
According to Islamic Finance Information Service (IFIS), National Bank of Dubai along with Velcan Energy Holdings (Dubai) are investing close to $140 million for the Velcan Hydro Power Plant in Arunachal Pradesh. Saudi Economic and Development Company (Sedco) and Bearys Group have come together to invest $20 million for the Bearys Global Research Triangle in Bangalore. HSBC Amanah will invest $50 million in Srei Projects while Gulf Finance House will invest $10,000 million for the Indian Economic Zone in Mumbai.
“Robust growth, requirement for huge investment in areas like infrastructure and strong legal framework (which protects foreign investors) are some of the reasons why Islamic investors are flocking into India. This number is expected to jump by 100% in 2008. We are expecting investments in the range of 10 to 15% this year,” said Bearys Amanah Investment CEO, Shariq Nisar, who is also an expert in Islamic finance. Arab investors find real estate, infrastructure, engineering and logistics as hot sectors. According to experts, government’s thrust towards infrastructure development via public-private partnerships will bolster investments in private equity space.
Sighting immense investment potential, there are several private equity funds waiting for the right time to invest in Indian assets. According to Global Investment House data, Abraaj Capital is planning to come out with three separate funds totalling to about $2,700 million. Ithmaar Bank is launching a $500-million balanced fund, with a view to invest in infrastructure. Global Investment House is coming out with $1,000-million pre-IPO fund while Dubai Islamic Bank is floating a global buy-out fund with a pool-size of about $3,000 million. Global Investment House is also launching a $1,500-million buy-out fund with focus on MENA countries.
According to Global Investment House, Gulf Co-operation Council (GCC) countries have alone invested around $406.3 million which constitute around 1% of India’s total FDI. Among them, UAE is the largest investor in India, accounting for around 79% ($321.1 million) of the total investment, followed by Bahrain ($32.7 million), Oman ($24.51 million), Saudi Arabia ($19.18 million), Kuwait ($8.87 million) and Qatar ($0.09 million).
Although there has always been talks of Islamic investors shifting their investment focus to emerging economies, the real trend of investing in India caught up in 2007. If one goes by numbers, the first real ‘all-Islamic’ finance deal materialised in October 2006 when Bahrain-based Gulf Finance House and the Maharashtra government joined hands to take up the Energy City India project. Gulf Finance House promised to invest close to $2,000 million for the project. Since then, there has been four major Islamic private equity investments in India all in 2007.
According to Islamic Finance Information Service (IFIS), National Bank of Dubai along with Velcan Energy Holdings (Dubai) are investing close to $140 million for the Velcan Hydro Power Plant in Arunachal Pradesh. Saudi Economic and Development Company (Sedco) and Bearys Group have come together to invest $20 million for the Bearys Global Research Triangle in Bangalore. HSBC Amanah will invest $50 million in Srei Projects while Gulf Finance House will invest $10,000 million for the Indian Economic Zone in Mumbai.
“Robust growth, requirement for huge investment in areas like infrastructure and strong legal framework (which protects foreign investors) are some of the reasons why Islamic investors are flocking into India. This number is expected to jump by 100% in 2008. We are expecting investments in the range of 10 to 15% this year,” said Bearys Amanah Investment CEO, Shariq Nisar, who is also an expert in Islamic finance. Arab investors find real estate, infrastructure, engineering and logistics as hot sectors. According to experts, government’s thrust towards infrastructure development via public-private partnerships will bolster investments in private equity space.
Sighting immense investment potential, there are several private equity funds waiting for the right time to invest in Indian assets. According to Global Investment House data, Abraaj Capital is planning to come out with three separate funds totalling to about $2,700 million. Ithmaar Bank is launching a $500-million balanced fund, with a view to invest in infrastructure. Global Investment House is coming out with $1,000-million pre-IPO fund while Dubai Islamic Bank is floating a global buy-out fund with a pool-size of about $3,000 million. Global Investment House is also launching a $1,500-million buy-out fund with focus on MENA countries.
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“Arab investors like private equity as an investment vehicle as it offers higher returns at higher risk. Risk appetite is high among GCC investors as their need for liquidity is fairly lower that investors of other countries,” said Kuwait Financial Center’s senior vice-president (research) M R Raghu. “Arab investors are also aggressive when it comes to real estate as they are familiar with this asset class,” he added.According to Global Investment House, Gulf Co-operation Council (GCC) countries have alone invested around $406.3 million which constitute around 1% of India’s total FDI. Among them, UAE is the largest investor in India, accounting for around 79% ($321.1 million) of the total investment, followed by Bahrain ($32.7 million), Oman ($24.51 million), Saudi Arabia ($19.18 million), Kuwait ($8.87 million) and Qatar ($0.09 million).
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