CDPQ Strengthens Ties With Piramal Enterprises

Late last week, the Caisse de dépôt et placement du Québec (CDPQ) announced an investment in Piramal Enterprises Limited (Piramal Enterprises), a leading Indian financial and industrial group active in financial services, pharmaceutical development and manufacturing, and healthcare information management. CDPQ will acquire US$250 million in convertible debentures from Piramal Enterprises:
“We are delighted to deepen our partnership with Piramal Enterprises, a company whose value creation approach aligns well with CDPQ’s long-term objectives and perspective as a global institutional investor,” said Anita M. George, Executive Vice-President and Head of Strategic Partnerships, Growth Markets at CDPQ. “This transaction further demonstrates CDPQ’s commitment to invest in different sectors of India’s economy.”

This transaction strengthens an existing partnership between Piramal Enterprises and CDPQ, which began with an initial investment in 2017 and includes a residential real estate co-investment platform with CDPQ’s real estate subsidiary Ivanhoé Cambridge.
Back in March, I discussed the Caisse's $250 million investment in ECL Finance Ltd, the non-banking financial company affiliated with Indian financial services provider Edelweiss Group, stating the Caisse is making a strategic long-term investment in one of India's fastest growing companies, capitalizing on that country's growing middle class.

Back in March, I also discussed why CPPIB and OTPP are eyeing projects in India and how Ontario Teachers' was part of a consortium looking to buy a stake in Anil Ambani’s Reliance Capital.

From what I've been reading, the embattled tycoon Anil Ambani, the younger brother of India’s richest man Mukesh Ambani, plans to sell off more assets to repay his creditors and Japan’s Nippon Life Insurance announced it had completed the acquisition of a 75% stake in Reliance Nippon Life Asset Management from Reliance Capital.

India is a very hot market right now for the primary reason that it is one of the few countries in the world which still pays a demographic dividend.

This is why CPPIB, the Caisse, OTPP, OMERS and other large Canadian pensions are all looking to capitalize on this long-term growth, mostly by investing in private markets in India (private equity, infrastructure, and real estate).

In August, I discussed how AustralianSuper, Australia’s largest superannuation fund, and Ontario Teachers’ signed agreements with the National Investment and Infrastructure Fund (NIIF) of India for investments of up to USD 1 billion with the NIIF Master Fund to invest in India's infrastructure.

Last week, I discussed how CDPQ and Ontario Teachers’ have partnered with industry veteran Anurag Chandra to launch a new insurance platform.

In that comment, I noted that a couple of weeks ago, CDPQ agreed to buy IDFC PE’s road assets in India for Rs 2,400 crore. 
Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) has agreed to buy erstwhile IDFC Private Equity’s road portfolio Highway Concessions One (HC1) for Rs 2,400 crore, three people with direct knowledge of the development said.

CDPQ pipped its Canadian peer, Canada Pension Plan Investment Board (CPPIB), and Indian sovereign wealth fund National Investment and Infrastructure Fund (NIIF), among others. HC1 comprises seven road assets covering 472 kilometres and having consolidated revenues of Rs 620 crore a year.

“The ask (valuation expectation) was around Rs 3,000 crore,” said a person involved in the process.

Global infrastructure fund manager Global Infrastructure Partners (GIP) had taken over private equity and other non-core businesses of IDFC in 2018 after the latter’s merger with First Capital.

The five toll roads and two annuity projects include Ulundurpet Expressways Pvt Ltd in Tamil Nadu, Nirmal BOT Ltd in Telangana, Dewas Bhopal Corridor Pvt Ltd in Madhya Pradesh, Bangalore Elevated Tollway Pvt Ltd in Karnataka, Godhra Expressways Pvt Ltd in Gujarat, Jodhpur Pali Expressway Pvt Ltd in Rajasthan and Shillong Expressway Pvt Ltd in Meghalaya.

A GIP spokesperson declined comment while a CDPQ spokesperson did not respond to emailed queries as of press time Tuesday.
In late July, I discussed why CDPQ and CPPIB were vying for GIP's HC1 portfolio, and CDPQ edged out CPPIB on this deal (I'm certain CPPIB will edge out CDPQ and others on other big deals).

This shows how there is a spirit of cooperation and some professional rivalry among Canada's large pensions as they are all vying for the same prized assets at times.

Again, India is the second most populous country in the world, right behind China, but unlike China its population is young and growing. Also, unlike China, it's the world's largest democracy and has mostly enjoyed political stability.

This is why many investors are trying to capitalize on India's long-term growth potential in financial services, telecom, healthcare and other sectors.

Retail investors can invest in India's market through a well-known exchange-traded fund (INDA) but as you can see below, it hasn't done much over the last two years:

This is understandable given that emerging markets stocks (EEM) in general haven't performed very well over the last two years:

So, it's not surprising Canada's large pensions are focusing their attention on private markets in India and other emerging markets as this is the same strategy they are using in developed markets to add value (alpha) over the long run.

And in a market like India, there's a lot of value to gain over the benchmark in private markets if you partner up with the right partners.

At the Caisse, that job falls under Anita M. George, Executive Vice-President and Head of Strategic Partnerships, Growth Markets.

Ms. George's mandate is to implement a key pillar of CDPQ’s strategy, which aims to increase its international exposure in targeted growth markets by sourcing the best investment opportunities and developing the organization’s network of sustainable and high-quality local partnerships. She is responsible for growth markets partnerships, and sits on CDPQ’s Executive and Investment-Risk Committees.

In other words, even though she is based in Mumbai, Anita George has a huge job at the Caisse, making sure Quebec's pension fund is partnering up with the right partners in India and elsewhere in growth markets to invest in the best private market deals.

Interestingly, the Caisse is way ahead of its large Canadian peers when it comes to gender diversity and inclusion. I've already noted before that its two real estate subsidiaries -- Ivanhoé Cambridge and Otéra Capital -- are now headed by two extremely qualified ladies, Nathalie Palladitcheff and Rana Ghorayeb. Anita George is another extremely qualified lady with huge responsibilities at the Caisse.

Erika Morphy wrote a great article on Nathalie Palladitcheff on GlobeSt which you can read here.

My sources tell me the Caisse is petrified of losing Ms. Palladitcheff and understandably so, there aren't many people in real estate with her experience and qualifications. She is a phenomenal leader.

Why am I mentioning this? Simple, I call it like I see it, I know all about pension fluff and window dressing and when it comes to diversity and inclusion, I like seeing action, not words. The Caisse doesn't just talk about gender diversity and inclusion, it acts on it in a decisive and professional manner.

This is important. Referring to Osler's 2019 Diversity Disclosure Practices report – Women in leadership roles at TSX-listed companies, Gemma Gillis, Director of Business Management - Investments at IMCO, stated this on LinkedIn:
Pleased to see gender diversity improve at the Board level, but it will be increasingly difficult to see an improvement at the CEO level if we aren’t carefully evaluating how we recruit and promote for GD&I, and really search for solutions to the “broken rung” on the ladder.

We have to concentrate on gender diversity at the first level of management before we can even see the glass ceiling, less alone break through it.
I couldn't agree more, gender diversity and inclusion has to be practiced at the first level of management if it's to make a forceful impact. That goes for TSX listed companies and public pensions.

This is why I applaud the Caisse which under Michael Sabia's leadership has done a lot to improve gender diversity and inclusion at the upper management level.

Is the Caisse perfect? Of course not. There is still room for improvement on gender diversity and inclusion at all levels and it can do a lot better hiring people with disabilities but I can lay that criticism to all of Canada's large pensions and pretty much all large private and public Canadian organizations (it's a travesty which one day I will ruthlessly and meticulously expose as one fifth of the Canadian voting population is disabled).

Anyway, this is a discussion for another day.

Below, listen to CDPQ's CEO Michael Sabia discussing the limits of monetary policy and why the world has serious structural growth problems because there is not enough investments taking place to bolster the growth potential of the world economy.

Next, the then World Bank senior director Anita Marangoly George discusses how energy lifts people out of poverty in this interview from the Statoil Autumn Conference (November 2015). Very smart lady who really knows her stuff.

Lastly, Piramal Enterprises undertakes a Rs 5,400 crore fund raising drive. Sajeet Manghat recently spoke to Ajay Piramal about how the group is looking to diversify its portfolio on Bloomberg Quint.

Great discussion, Mr. Manghat refers fondly to Piramal's partnership with CDPQ.