Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund, is reportedly planning to establish a $4.5 billion fund to invest in India through GIFT City.
The International Financial Services Centres Authority (IFSCA) at GIFT City has granted in-principle approval to ADIA for setting up the fund, making it the first sovereign wealth fund to establish a presence in the tax-neutral finance hub.
Through the GIFT City route, ADIA will have the opportunity to invest in Indian startups, debt securities, and both Indian and foreign equities.
According to sources, ADIA is expected to commence investments through the fund by mid-2024. Furthermore, ADIA and its wholly-owned subsidiaries are reportedly exempt from long-term capital gains taxes on Indian investments, benefiting from a special provision introduced in 2020, which will remain applicable until at least March 2025.
"Around the middle of this year, ADIA could start investing through this fund. The allocated funds would be invested in India over a period of time," said a source familiar with the matter.
IFSCA is also reportedly in preliminary discussions with other sovereign wealth funds to establish operations in GIFT City.
This development coincides with the Indian government's efforts to stimulate activity in GIFT City. Recently, rules were notified for the direct listing of Indian companies on GIFT City exchanges. Finance Minister Nirmala Sitharaman also highlighted GIFT City's role as a "gateway for global capital and financial services for the economy" in the interim Budget 2024.
GIFT City offers a 10-year tax holiday for companies establishing a presence there, along with zero taxes on fund transfers from overseas jurisdictions. These incentives have led to increased fund management activities in GIFT City, with 95 local and global funds committing $30 billion and investments totaling $2.93 billion as of December 2023.
Domestic companies are also showing interest in GIFT City. Paytm announced plans to invest INR 100 crore to build a global financial ecosystem, while Infibeam Avenues aims to establish an AI hub there. Additionally, We Founder Circle's GIFT City Fund raised $10 million in December 2023 and attracted over 250 investors.
The move by ADIA underscores the growing significance of GIFT City as a preferred destination for investment and financial activities, further bolstering India's position in the global financial landscape.