India eyes $600 billion sovereign fund by pooling stakes in PSUs

The Indian government plans to pool its stakes in listed public sector units (PSUs) to set up a sovereign wealth fund with a corpus of about ₹50 trillion (about $600 billion), Mint reported, citing unidentified people aware of the developments.

The sovereign fund will offload new and existing shares, receive dividends, raise funds from strategic investors and borrow against shares to raise capital for its corpus that will be invested in India and overseas, the report said.

The government owns more than a 51% stake in 48 listed companies that will be transferred to the sovereign fund, the report said, adding that the state’s stake in every company going public will also form part of the sovereign fund.

The Indian government is also considering transferring its shares in the Specified Undertaking of the Unit Trust of India (Suuti) to this fund. Suuti has stakes in several publicly listed companies.

The plan is reportedly still in the early stages and is being discussed internally within the government and at PSUs.

At least 40 nations, including large economies such as China, the US, and Russia, and smaller countries such as Pakistan, Indonesia, and Malaysia, own sovereign wealth funds.

Norway’s Government Pension Fund Global, Singapore’s Temasek, Abu Dhabi Investment Authority, Qatar Investment Authority, and Mubadala Investment Co are some of the well-known sovereign funds.

The countries tap these funds to acquire critical assets and build infrastructure in other nations, while India taps such opportunities and acquisitions through public sectors firms already in the particular sector.

A case in point is Khanij Bidesh India Ltd, a joint venture company comprising three PSUs: National Aluminium Co. Ltd, Hindustan Copper Ltd, and Mineral Exploration and Consultancy Ltd.

The government is currently in talks with governments in Africa and Latin America to secure rare earth metals such as lithium. Such overseas deals are funded mainly through these companies’ balance sheets.

In addition to investments in critical technology and energy security through the sovereign wealth fund, the government also intends to invest in the domestic market.