India's First Sovereign Wealth Fund In The Making, To Be Created By Pooling Centre's Shares Of State-Run Companies

The Narendra Modi government plans to establish India's first sovereign wealth fund by consolidating its holdings in publicly listed state-owned companies, according to Mint.

The fund will utilise both new and existing shares, collect dividends, attract strategic investors, and borrow against its shares to build its investment capital.

The initiative will involve transferring shares from listed public sector undertakings (PSUs) and the Specified Undertaking of the Unit Trust of India (SUUTI) to the new fund. SUUTI holds equity in various private companies.

This plan, which is still under discussion, could see a potential corpus of Rs 50 trillion from these companies, which would be used for both domestic and international investments.

The Centre has over 51 per cent stakes in 48 publicly traded companies, all of which will be moved to this fund. Future stakes in newly listed companies will also be transferred.

"The Centre may also sell new shares in these PSUS minus voting rights, so that its own voting rights do not get diluted. Additionally, it may bring in regulation for so-called golden share, which gives its owner relatively more power in terms of management and economic rights, and special control," the Mint report says.

The government has consulted experts, including Axis Bank chief economist Neelkanth Mishra and Kotak Mahindra Asset Management Co. managing director Nilesh Shah, for their opinions on the matter, the report adds.

The goal, the report says, is to establish a sovereign wealth fund managed by professionals, akin to Singapore's Temasek and GIC, which were founded in the 1960s and 1970s. These sovereign funds played a key role in launching major corporations, such as Singapore International Airlines.