Citi India has acted as a qualified depository participant (QDP) custodian, as well as the execution broker, for an investment made by South Africa’s largest financial services group Sanlam, through the qualified foreign investor (QFI) scheme.
The investment of around US$111m is the largest made by a QFI in India, since the easing of QFI regulations for investing in Indian equities last summer. The transaction, the first of its kind supported by a foreign bank custodian in India, reinforces the efforts of the Government of India (GOI) to allow QFIs to directly invest in the Indian equity market, with Sanlam making an equity investment in a listed stock in India through the scheme.
“This was an important investment in a group company of one of our long standing partners in India,” commented Gerrit Van Heerde, chief financial officer (CFO) of Sanlam Emerging Markets. “The investment made through the QFI scheme, ably supported by Citi India, demonstrates the capabilities of its people and platform in making an extremely difficult deal become reality. The advantages of the QFI scheme are immense in time sensitive deals as this one.”
Debopama Sen, Country Head, India of securities and fund services for Citi, added: “Citi continues to actively engage in discussions with regulators and investors across diverse forums, highlighting the multiple benefits of a simplified QFI framework as one of the preferred investment routes into the Indian markets.
“Sanlam’s investment through this route is extremely encouraging and we look forward to further investments from other leading investors in our portfolio using the simplified QFI route.”
Gagan Rai, managing director and chief executive officer (CEO) of the Mumbai-based National Securities Depositary Limited (NSDL) said: “Post this transaction, current investments stand at approximately rupees [INR] 6.8bn [US$126m] in Indian equities and INR 4.4bn in fixed income though this investment route.
“We are confident that investments will significantly increase over the year as investors understand the many benefits of investing as a QFI.”
The QFI framework simplified India access for foreign investors who are members of the Financial Action Task Force (FATF) jurisdictions, allowing them to invest in India without being registered with the Securities and Exchange Board of India (SEBI) or meeting the set eligibility criteria for a foreign institutional investor (FII) or sub-account in India.
Citi said that to encourage the use of this investment route, the bank has been in discussions with various potential QFIs and regulators, to simplify the requirements further and attract fresh investments under this scheme. The revised guidelines announced by the GOI permits QFIs to open a segregated bank account in India and allow QDPs to rely on authorised intermediaries like global custodians to verify certain documents, allow Permanent Account Number (PAN) card copy to be verified online, among others.
The changes in regulations are expected to widen the class of foreign investors and deepen the Indian capital market, thereby helping reduce market volatility in the equity markets.
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