UAE’S ADIA To Set Up $4.5 Bn Fund In GIFT City To Invest In India

Sovereign wealth fund Abu Dhabi Investment Authority (ADIA) reportedly plans to establish a $4.5 Bn fund to invest in India via the GIFT City.

The regulatory authority for financial services, International Financial Services Centres Authority (IFSCA), at GIFT City has granted in-principle approval to ADIA to set up the fund, Reuters reported citing sources. With this, ADIA will become the first sovereign wealth fund to set up base in the tax-neutral finance hub. 

It is pertinent to note that the GIFT City route will allow the investment giant to invest in Indian startups, debt securities, and both Indian and foreign equities. 

As per the report, the sovereign wealth fund is likely to start investing via the fund as soon as the middle of 2024. ADIA and its wholly-owned subsidiaries are also reportedly exempt from long-term capital gains taxes incurred on Indian investments on account of a special provision introduced in 2020. This tax break will be applicable for ADIA till at least March 2025.

“By the middle of this year, ADIA could start investing through this fund. The allocated funds would be invested in India over a period of time,” said a source.

Meanwhile, the IFSCA is also reportedly in early-stages of talks with other sovereign wealth funds to set up operations in GIFT City.

The development comes at a time when the union government has pulled all stops to boost activity at the much touted finance hub. Just last month, the Centre notified rules for direct listing of Indian companies on the exchanges of the GIFT City. 

It also found a mention in the interim Budget 2024. In her speech, finance minister Nirmala Sitharaman said that the Centre was looking to GIFT City as a “gateway for global capital and financial services for the economy”.

The finance hub offers a 10-year tax holiday for companies setting up bases there and zero taxes on the transfer of funds from overseas jurisdictions. As a result of these sops, fund management activities at GIFT City have picked up. 

It boasted of 95 local and global funds with commitments to the tune of $30 Bn and investments worth $2.93 Bn at the end of December 2023.

Not just local companies, domestic players have also made a beeline for the GIFT City. Recently, the now-troubled fintech major Paytm said it would invest INR 100 Cr in GIFT City to build a global financial ecosystem, while Infibeam Avenues is also looking to establish an AI hub there. 

Not just this, angel investment networking platform We Founder Circle (WFC), in December 2023, said its GIFT City Fund had raised $10 Mn and onboarded more than 250 investors.