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‘India is key to Ontario Teachers’ Pension Plan Board’s Asia story, easy to do business in’

With more than Rs 18,374 crore invested in India in public and private equity, Ontario Teachers’ Pension Plan Board (OTPP) is setting up a local office six years after making its first investment in the country in Snapdeal. This is part of its expansion into fast-growing emerging markets, said the top executive at Canada’s largest, single-profession public-pension manager. “We have deployed even without having an office. Covid delayed our plans,” Jo Taylor, chief executive of OTPP, said in an interview.

“India is key to our Asia story. But with an office here, we think we will do better, be able to add value with more feet on the street, as we think we have a distinctive offering.”

Although it started with a focus on infrastructure, the Mumbai office will target investments in India across all asset classes, including public and private equities, infrastructure, real estate, credit and venture and growth equity. Deepak Dara, an existing OTPP employee, has been appointed senior managing director and head of India and will assume the role in early 2023.

Attractive investment destination

A former BCG consultant, Dara joined OTPP in 2020 as chief of staff to the chief investment officer, working on advancing many global and cross-asset class initiatives.

Housing Development Finance Corp Ltd (HDFC) chief executive Keki Mistry will be a senior adviser to OTPP.

“India is an attractive investment destination and will be one of our growth markets over the next five to 10 years,” Taylor said. “It has a large, growing and dynamic economy, with openness to foreign capital, which makes it a strategically important market for us.”

Taylor credited the Indian government with being responsive to the needs of foreign investors such as OTPP. “In my experience, India has been pretty easy to do business in, from the start,” he said. “The government has been quite responsive to issues like withholding tax.”

With $242.5 billion of net assets as of June 30, OTPP has identified nine countries – three each in Europe, the Americas and Asia – as strategic “bedrocks” for its growth. China, India and Australia are part of the Asian trio.

OTPP is among Canadian pension funds that have expanded their global presence in recent years to be counted alongside the world’s largest pools of institutional capital. CPP Investment Board (CPPIB) opened its India office in 2015 and has among the biggest portfolios, with over a dozen deals since then in infrastructure and real estate.

Brookfield Asset Management is the largest Canadian investor in terms of dollars deployed in the country, doing deals with large Indian conglomerates such as Reliance Industries Ltd, apart from being one of the biggest owners of commercial and office buildings.

India focus

OTPP has been a sponsor or limited partner to several India-specific funds such as Kedaara Capital, ChrysCapital and even the quasi sovereign wealth fund, National Investment and Infrastructure Fund (NIIF), or credit funds such as Edelweiss Alternative Asset Advisors. But it’s emphasising direct investment.

“Eighty percent of what we invest is through direct investments,” said Taylor. “We adapt as per the local market. In India we have been doing control deals or partnering with pedigreed partners like the Mahindra Group.”

OTPP bought a controlling stake – its first in the country – in the Sahyadri Hospitals Group in August. The largest private hospital chain in Maharashtra, Sahyadri has eight hospitals, with 900 operating beds and 300 critical-care beds.

Earlier in the month, it bought a 30% equity stake in Mahindra Susten, the solar EPC arm of the tractor-to-technology conglomerate, at an equity value of approximately $300 million.

The duo will also explore setting up an infrastructure investment trust (InvIT) comprising operational renewable assets. Over the next seven years, OTPP has committed to deploy an additional amount of up to Rs 3,550 crore in the business and the InvIT.

Risk profile

OTPP’s risk profile is different, said Taylor. Only 35% of its capital pool is allocated to equities, as opposed to 85% of CPPIB, he said.

In March, the fund said it returned 11% in 2021, as improved performance in its private equity and natural resource investments mitigated losses in its bond portfolio. Investing in the midst of a volatile environment – geopolitical flux, interest rate hikes, commodity price inflation and a looming US recession – makes it harder to sustain momentum.

“Currency, I feel, is the most topical issue that we are facing and that is causing us to pause for reflection,” Taylor said. “We are pretty long on US dollar-denominated currencies and that’s great. But it’s nice to have a diversified exposure to a range of currencies.”

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