India provides tremendous opportunities in digital right now: Mubadala's realty CEO

Khaled Abdulla Al Qubaisi

Mubadala Investment Company, a top sovereign wealth fund of the United Arab Emirates with more than $284 billion in assets under management, sees tremendous opportunities in the Indian digital space, driven by economic growth and the the government's policy direction.

The prominent global investor, which prefers minority stake deals, has pumped in over $4 billion so far in India across diverse bets that include Jio Platforms, Reliance Retail, Tata Power's renewable energy business and India's largest toll road platform, Cube Highways InvIT ( infrastructure investment trust).

In an exclusive interview with Moneycontrol's Ashwin Mohan, Khaled Abdulla Al Qubaisi, CEO of Real Estate and Infrastructure Investments at Mubadala, says renewables, road infrastructure and gas distribution networks will be the firm's focus segments in India, even as he doesn't rule out health tech and fintech bets within the domestic conglomerates it has picked as partners.

Excerpts from the interview:

Mubadala has deployed more than $4 billion in India, and this deployment has been across multiple sectors like renewables and roads. Going ahead, how much does Mubadala plan to invest in the next three years in India? I'm asking you this question because some of the prominent global investors like Temasek, for example, have told us earlier that they're looking to pump in $10 billion here over three years.

We started directly investing in India relatively recently from April 2020, and Mubadala has deployed in total more than $ 4 billion. The Real Estate & Infrastructure Investments Platform is actively looking at deals, so you might hear about some more investments towards the year-end. India is an interesting market. We waited for the right opportunity to deploy sizeable capital, and we were able to do this with our deals to invest in Jio Platforms and Reliance Retail during the Covid-19 pandemic in 2020. We followed this up with major investments in 2022 in Tata Renewables and then in Cube Highways.

However, it is not just about the numbers, it’s more about the areas in which you get comfortable as an institution to deploy a sizeable capital in certain sectors. We identified telecommunication, consumer retail, renewable space, infrastructure highways, healthcare, and energy transition. Choosing the right opportunities in the right sector for Mubadala is very important, and with the backing and support of the country we have been able to deploy significant capital into India and we expect to deploy more. It's a matter of finding the right deals that suit us going forward.

Now 40 percent, or roughly around $1.6 billion, of the total Mubadala investments in India has been done by the real estate and infra verticals and that's what you handle. Would you look at doubling or tripling that amount?

That's why they call me the Mubadala India ambassador or champion here. We got off to a good start with Jio Telecommunications with an investment of $ 1.2 billion followed by Tata Renewables, $225 mn and over $300 mn with Cube highways. We are looking at renewables, traditional and digital infrastructure and then other areas that support the energy transition such as gas distribution networks. It's probably going to be hard to replicate the same size of deals again, but if we find the right opportunities then we will be interested.

The $1.2-billion Jio deal was larger than most of our deals, where we usually deploy between $200 million and $300 million. So it is hard to commit to an absolute total investment target – but what I can tell you is we are committed to growing our portfolio in India and will deploy capital when the right opportunities arise. If you ask me how much I would like to deploy, then the answer is I would like to deploy more in the future than we have to date, but this will depend on the opportunities and where we see we can add value.

InvITs ( infrastructure investment trusts ) and REITs ( real estate investment trusts) are instruments that have picked up well in India over the last few years. Mubadala has invested in the largest toll road platform in India and is one of the anchor investors in Cube Highways in their newly launched InvIT in India. What is your India strategy on INVITs and REITS and as a global investor, are you looking forward to any further changes to the regulatory and policy regime here to make the environment friendlier for folks like you?

There are some very good regulatory frameworks that help make it easier for investors like us to deploy capital in India and then also find ways to repatriate capital. We see space for some further developments in regulation to ease the flow of capital in both directions. But right now, it is working for us and we are comfortable with it.

From what we have seen, the country is continuing to work on improving regulatory frameworks and making an investor-friendly environment in India, which includes easing capital flows. We receive regulatory updates and are in regular contact with the government, with our feedback always taken into consideration. We already feel very comfortable investing in India, and we feel it is only going to get better.

Tell us how excited is Mubadala about the digital and startup space in India. You know, a few years back there was a massive surge in the number of unicorns in India. Then there was a tech slowdown followed by the funding winter which some say is still on. Any sub-segments like consumer tech, ed tech, health tech or fintech which excite you?

Shortly after our investment in Jio, we followed it up with a consumer tech investment in Reliance Retail so that goes to show that we're interested. And India is providing tremendous opportunities in digital right now, driven by growth and supported by the government’s direction. Digital is also going to be a big driver in India’s future because it’s a very important backbone of infrastructure and a key driver of socio-economic progress.

In terms of other areas, we have not yet looked at health tech, we are looking at healthcare, but I am sure health tech will come in later on. We also see opportunities in fintech, but we're not yet chasing it right now. It depends on when the right opportunity presents itself, and this might come from within the groups we are working with, whether it's Reliance, Tata or some of the other big Indian conglomerates. We are continuously evaluating opportunities to increase our presence across all sectors in India and when we see an attractive opportunity that makes sense for us to invest a sizable amount of capital, we will definitely be interested.

Population and economic growth will result in even more opportunities going forward in India, and Mubadala is excited about the prospects of further growing our portfolio here.

If you compare yourself with your Middle East peer ADIA, Mubadala has been a little more conservative and has made fewer investments. You are in charge of infra and real estate. What about the real estate space and any reason why a major real estate investment hasn't been made yet in India? For example, if you look at ADIA, they have partnered with multiple parties in real estate platforms. Can we expect similar partnerships or investments going ahead?

I wouldn't say that we are less aggressive than ADIA. ADIA is more than double our age. You know we're just over 20 years old now and ADIA has been in existence for about 40 years and the real estate practice has been there from the beginning. We started the real estate portfolio in 2014, so we are not yet as large as ADIA all around the world. We are a much younger institution, and have a smaller portfolio in real estate. We have been looking at India, but during the last few years, it wasn't an easy time to get into ( the sector) due to the market timing and Covid-19. We continue to look at opportunities in real estate, including on the credit side, but to date haven’t deployed capital in the sector. Right now, through one of our companies, we're exposed to that area by providing cooling services through Tabreed. So in that sense, we're supporting real estate by doing this and we continue to look at the market and hopefully in the future will find the right deal to invest in.

You've already been exposed to InvITs, with the investment in cube highways, what about ReITs, real estate investment trusts? Is that an investment platform that you might be looking at or would you be looking at non-ReIT investments in real estate in India?

There are many routes of investing in real estate. We create platforms in different geographies and in certain sectors such as in logistics. We have a US logistics platform, we have a European logistics platform, and we have similar logistics platforms in Australia, South Korea, and Japan amongst others. In different sectors, we like to invest in platforms and form partnerships with the best local partners, and that might be the route that we will take in India as well. There's a group we're working with that might be spinning off their logistics assets and that was an area that was of interest to us. So that's really how our approach at Mubadala goes. To date, we haven’t invested in funds or REITS, but maybe in the future.

Correct me if I'm wrong, but it's mostly minority positions that Mubadala looks at right, not majority, at least, from whatever I've seen. Would you be looking at perhaps control situations if the asset is attractive enough?

Globally, it has not been our strategy to take a controlling position. We've had some over the years, but we're not actively going forward with that approach around the world, and I think that is especially true for India. In India to date, we partner with the right groups and leave the day-to-day operations to them. We provide capital and we can add value if required through some sort of governance, but definitely not a controlling or a majority stake. Typically, 10 percent to 20 percent is where we'd like to see ourselves.

Coming back to Infra, if I were to ask you to pick one segment in Infra that could possibly see more investments from Mubadala going ahead, would it be roads, renewables, smart meters, or city gas? Would you like to stick your neck out and pick one of them?

Well, the investments we've made so far, we like a lot. So, if we can do more of them, that'd be great. There are renewables, road infrastructure and gas distribution networks, we think it's an interesting area and it's also part of the energy transition as India goes away from coal and cleaner fossil fuels. These sectors alone will require billions and billions of dollars of capital – and I think these provide a great opportunity for us. These will remain the key areas that we continue to look at, and as opportunities arise in new sectors we are comfortable with we also consider them. As I told you, we only started deploying capital in India 3 1/2 years ago. We're just starting to learn how to walk, but we want to run quickly and we just need some time.

Are you looking forward to a public listing of any of your Indian portfolio companies in the next few years?

To be honest, we are coming in with a long-term view as a capital provider. So, we're not in a hurry to push the companies to go public. I think they should go public if and when they're ready at the right time for both, the company and the market. So, we don't put any pressure and we leave it to our partners who are driving those businesses.

What is Khaled Qubaisi's vision for Mubadala Infra and real estate in India? How would you like to be positioned and perceived as an investor?

We would like to be seen as one of the really trusted and respected partners in India for local conglomerate players as well as international players who would like to deploy capital in India. We are not just in India to receive a return on our capital, but we are invested in the development of the country’s infrastructure and supporting socioeconomic progress for India and its people.

We are really proud when we are contributing to improving roads across India, supporting the energy transition and improving the digital economy for India. Every citizen in India can feel the benefits of these investments, and we are proud to be supporting the country in developing its infrastructure so it can unleash its great potential going forward.

If you look at the global environment, the interest rate regime, inflation, and geopolitical strife, what are some of the reasons that make investors like Mubadala bullish on India? You know, many investors call it the lone shining spot today.

It's not been easy for investors over the past few years. It seems every year there's a Black Swan event coming. And now, we hear there may also be a Green Swan event, with the rising temperatures around the world.

But, of course, India is one of the few major economies around the world that consistently shows its growth potential, and we expect to see this continue, not only in the short term but in the medium and also maybe in the long term. The country’s growth is driven by an increasing population and changing demographics. India offers an economy that can provide investors with a good return and hedge over the current risks, including interest rates, the environment, inflation and so on. India is a very promising market that offers great opportunities, and we expect this to continue for many years to come.

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