UAE's ADIA unveils ambitious $4-5bn investment plan in India via Gujarat's finance hub

The Abu Dhabi Investment Authority (ADIA), the largest sovereign wealth fund in the UAE, is preparing to launch a substantial $4-5 billion fund aimed at investing in India through the tax-neutral finance hub in Gujarat, known as Gujarat International Finance Tec-City (GIFT City).

According to Reuters, two undisclosed sources with direct knowledge of the matter revealed that the regulatory authority for financial services at GIFT City has granted in-principal approval for ADIA to establish the fund.

This strategic decision by ADIA, first announced in a joint statement by India and the UAE last July, positions the sovereign wealth fund as the pioneer in making investments in India through GIFT City.

The regulatory approval, not previously reported, signifies a step forward for the fund's entry into the Indian market.

ADIA's spokesperson declined to comment, and queries to the International Financial Services Authority (IFSCA), the hub's regulatory body, went unanswered.

The $4-5 billion fund is expected to be operational by the middle of this year, as stated by one of the sources.

These allocated funds will be systematically invested in India, marking a major financial development for the region.

Investments can cover a diverse range of assets, including Indian and foreign equities, debt securities, and more.

GIFT City, located in Prime Minister Narendra Modi's home state of Gujarat, has been gaining attention as Modi's government aims to enhance its financial significance.

Recent initiatives include allowing unlisted Indian firms to list shares directly on exchanges within the city.

Finance Minister Nirmala Sitharam emphasised during the budget announcement that GIFT City is envisioned as a "gateway for global capital and financial services for the economy".

ADIA's approval to operate in GIFT City is seen as a landmark decision, coming just ahead of Prime Minister Modi's scheduled visit to Abu Dhabi to inaugurate a grand temple.

This move strengthens the bilateral ties between India and the UAE, with trade reaching $85 billion for the financial year ending March 2023.

The UAE is also home to one of the world's largest Indian diaspora populations, constituting almost 35 per cent of the country's total population.

The financial landscape within GIFT City offers enticing benefits, including a 10-year tax holiday for companies establishing their presence there.

Additionally, there are no taxes imposed on fund transfers from overseas jurisdictions, providing proximity to Indian markets.

ADIA and its subsidiaries have been granted exemptions from long-term capital gains taxes on Indian investments, a special provision applicable until March 2025 ([Reuters]).

As of December 2023, GIFT City had 95 local and global funds with commitments totalling $30 billion and investments exceeding $2.93 billion.

The International Financial Services Authority (IFSCA) is actively engaging in early discussions with other sovereign wealth funds to set up operations in GIFT City, indicating the growing appeal of this finance hub.

(With inputs from Reuters)