UAE’s ADIA Establishing $4.5 Billion Fund in GIFT City for Indian Investments

The Abu Dhabi Investment Authority (ADIA), a sovereign wealth fund, is reportedly gearing up to establish a $4.5 billion fund to invest in India via the Gujarat International Finance Tec-City (GIFT City).

In-Principle Approval Granted by IFSCA

The International Financial Services Centres Authority (IFSCA), the regulatory body overseeing financial services at GIFT City, has granted in-principle approval to ADIA for setting up the fund, according to sources cited by Reuters. This move positions ADIA as the first sovereign wealth fund to establish a presence in the tax-neutral financial hub. Importantly, the GIFT City framework will enable ADIA to invest in various Indian assets including startups, debt securities, and Indian and foreign equities.

Timeline and Tax Breaks

It's anticipated that ADIA will commence investments through the fund as early as the middle of 2024. Furthermore, ADIA and its subsidiaries are reportedly exempt from long-term capital gains taxes on Indian investments, benefiting from a special provision introduced in 2020. This tax exemption is set to remain applicable until at least March 2025.

What Are The Future Prospects with Other Sovereign Wealth Funds?

IFSCA is reportedly in preliminary discussions with other sovereign wealth funds to establish their operations within GIFT City, indicating potential future growth and investment opportunities.

Government's Push for GIFT City

The Indian government has been actively promoting GIFT City as a significant financial centre. Recent initiatives include the facilitation of direct listings for Indian companies on GIFT City exchanges.

Tax Incentives and Growth

GIFT City offers attractive incentives such as a 10-year tax holiday for companies establishing a presence there and zero taxes on fund transfers from overseas jurisdictions. These incentives have spurred increased fund management activities at GIFT City, with significant commitments and investments reported by the end of December 2023.

Interest from Domestic Players

Domestic companies are also showing interest in GIFT City. Notably, troubled fintech giant Paytm announced plans to invest INR 100 crore in GIFT City to develop a global financial ecosystem. Similarly, Infibeam Avenues aims to establish an AI hub within the city.

Angel Investment and Funding

In December 2023, angel investment networking platform We Founder Circle (WFC) revealed that its GIFT City Fund had raised $10 million and onboarded over 250 investors, underscoring growing investor confidence in the city's potential as a financial hub.

Conclusion

ADIA's planned establishment of a $4.5 billion fund in GIFT City marks a significant milestone in India's financial landscape, showcasing growing international interest in the country's investment opportunities. With supportive government policies, tax incentives, and a burgeoning ecosystem, GIFT City is poised to emerge as a key player in the global financial arena, attracting investments and fostering innovation in the years to come.

-Prisha Jaiswal