Canada pension funds stay committed to India investments amid diplomatic tensions

Amid India-Canada diplomatic tensions, Canadian pension funds have retained their substantial Indian equity holdings, demonstrating a steadfast long-term approach. Market experts believe that Canadian investors continue to show commitment to India, minimising the influence of current tensions on their investments.

“Pension funds, known for their long-term investment perspective, typically do not react hastily to such geopolitical events. They maintain a strategic outlook and are likely to wait for developments before making any major adjustments. There’s a reasonable expectation that this issue will be resolved over time. However, should the tension escalate further, a thorough analysis of the situation will be warranted. At this moment, it’s crucial for investors to remain steady and avoid succumbing to panic,” said Parth Nyati, Founder at Tradingo.

CPPIB holdings

The Canada Pension Plan Investment Board (CPPIB) has stakes in six listed Indian stocks worth over Rs 16,093 crore and five unlisted stocks valued at approximately Rs 16,200 crore as of September 22.

In the listed segment, Canada Pension Plan’s largest Indian stock investment is in Kotak Mahindra Bank, in which it holds a 2.68 percent stake valued at Rs 9,494.36 crore. Zomato follows with a 2.37 percent stake worth Rs 2,050 crore. The Canadian fund holds a stake worth Rs 1,884.49 crore in Delhivery, while it owns a 2.18 percent stake valued at Rs 1,072.32 crore in Indus Towers Ltd. Canada Pension Plan also holds shares worth Rs 951 crore in One 97 Communications Ltd (Paytm) and Rs 610 crore in FSN E-Commerce Ventures Ltd (Nykaa). It holds a stake worth around $10 million in ICICI Bank. The fund also holds stakes in US-listed shares of IT giants Wipro and Infosys, valued at approximately $12 million and over $22 million, respectively, as indicated by the 13-F filings.

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Furthermore, the Canada Pension Plan fund has established strategic partnerships with Indian entities, including Piramal Enterprises and the Shapoorji Pallonji Group, for investments in renewable infrastructure and office building acquisitions. Its collaborations extend to projects of L&T Infrastructure Development, underscoring its significant presence in India’s investment arena.

In the unlisted space, Canada Pension Plan holds a 4.3 percent stake valued at an estimated Rs 7,633 crore in Eruditus. It also has a 2.2 percent stake in Flipkart worth Rs 6,663 crore. Additionally, the fund owns stakes of Rs 292 crore in Acko and Rs 1,456 crore in Byju’s. In VerSe, it holds a 6.2 percent stake, estimated to be worth Rs 207 crore.

Canada FPIs

Collectively, foreign portfolio investors (FPIs) from Canada oversee Rs 1.77 lakh crore in Indian equity assets under custody (AUC) as of August 2023. Canada holds the seventh position among the largest investors in India, with the United States and Singapore leading the FPI rankings, as per data from the NSDL depository. Canada has invested approximately Rs 1.51 lakh crore in equities and Rs 21,443 crore in debt. There are 468 foreign institutional investors (FIIs) registered with SEBI, as per available data.

Recently, the government reassured Canadian pension funds that they need not withdraw investments from India amid the current diplomatic standoff. These investments in Indian infrastructure were made for higher returns, which are not easily found elsewhere.

Market expert Ajay Bagga highlighted that Canadian institutional investors are big investors in India, who have invested keeping in mind the political and market risks. Bagga spoke to two significant Canadian investors in India and he discovered that they remained invested in the country despite the political tensions between the two countries.

“This is my personal assessment taken from conversations with Canadian investor friends who have stated that this is an impact which is too small for them on a Canada-India trade basis to withdraw funds from Indian markets,” said Bagga, hoping that this sanity will prevail.