Will India-Canada Feud Impact Canadian Pension Funds? From Zomato To Kotak Bank, Top CPPIB Investments

Tensions between India and Canada continue to escalate, with tit-to-tat actions from both sides, days after Canadian Prime Minister Justin Trudeau accused India of Khalistani separatist Hardeep Singh Nijjar's killing. India has denied the allegations, while Trudeau stayed firm on his statements. While the two countries are in the midst of a feud, questions also arise in the case of Canadian Pension Funds who have been among the long-term investors in the Indian market. The Canada Pension Plan Investment Board, operating as CPP Investments, is in fact among the major public shareholders of six large Indian stocks.

The Canada Pension Plan Investment Board which oversees and invests globally, is one of the world's largest investors in private equity. Although it is a Crown corporation, yet the CPPIB is not seen as a sovereign wealth fund as its operations are at arm's length from the Canadian government and exclusively manages CPP contributions paid by workers and employers, and not public funds.

As of now, the CPPIB holds six Indian stocks with its shareholding ranging from 1% to as high as 6%. In value terms, the Canada Pension Plan's largest shareholding is in Uday Kotak-backed Kotak Mahindra Bank followed by Zomato, Delhivery and Indus Towers. In percentage terms, the largest holding is in the Indian logistic company delivery. The other two stocks are Paytm and Nykaa. That being said, four of these stocks are top new-age companies.

Till September 22, 2023, the Canada Pension Plan's investments in these six stocks were valued at around Rs 15,911.77 crore.

1. Zomato:

As per the shareholding pattern on BSE, as of June 30, 2023, the Canada Pension Plan Investment Board holds 20,35,24,655 equity shares or 2.42% of online food delivery giant, Zomato.

On September 22nd, Zomato shares stood at Rs 99.85 apiece, up by 0.7% on BSE. Its market cap is around Rs 85,915.40 crore.

At the current market price, the Canada Pension Board's holding is valued at Rs 2,032.19 crore as of now.

Year-to-date, Zomato shares have rallied by nearly 66% on BSE.

2. Paytm:

In this fintech giant, Canada Pension Plan holds 1,11,46,932 equity shares or 1.76% as of June 2023.

On BSE, Paytm shares currently are at Rs 850.55 apiece, up by 1.3% on Friday. Its market cap is around Rs 53,956.33 crore as of September 22.

Canada Pension Plan's shareholding in Paytm is currently valued at Rs 948.10 crore.

So far, in 2023, the stock zoomed by over 59% on the exchange.

3. FSN E-Commerce Ventures aka NYKAA:

Canada Pension Plan's shareholding in Nykaa stands to the tune of 4,19,38,146 equity shares or 1.47% as of June 2023-end.

Nykaa shares ended at Rs 143.50 apiece, up by 1.09% on BSE after market hours of September 22. The company's market value is at Rs 40,951.07 crore currently.

That being said, Canada Pension Plan's shareholding is valued at Rs 601.81 crore at present in this fashion and beauty e-commerce player.

Unlike above to leading new-age firms, Nykaa shares have dipped by at least 7.5% YTD.

4. Delhivery:

In percentage terms, Canada Pension Plan's largest holding is in this Indian logistics and supply chain company, Delhivery. As of June 30, 2023, the Canadian pension fund households 4,38,81,500 equity shares or 6% in the company.

On BSE, the stock ended at Rs 430.60 apiece, flat compared to the previous session's print on September 22. Its current market value is at Rs 31,599.02 crore.

On the current price level, Canada Pension Plan's shareholding is valued at Rs 1,889.54 crore as of September 22, 2023.

Delhivery shares have gained by nearly 30% so far in the current year.

5. Indus Towers:

The Canadian pension funds also have a portion of telecom infrastructure firm, Indus Towers which was formerly known as Bharti Infratel. As of June 30, 2023, the Canada Pension Plan has 5,86,45,238 equity shares or 2.18% in the company.

Indus Towers stock price stood at Rs 183.45 apiece, up by 2.8% on BSE during September 22 session. The company's market cap is around Rs 49,438.62 crore.

On the current market price, the Canadian pension plan's shareholding is valued at Rs 1,075.85 crore currently in the company.

However, Indus Tower's year-to-date performance is a downfall of a meagre 3.5% in stock price. Nevertheless, the stock has gained by nearly 24% in a months period on BSE.

6. Kotak Mahindra Bank:

Canada Pension Plan also has a liking to the leading private sector lender, Kotak Mahindra Bank. As of June 30, 2023, the pension plan's shareholding stood at 5,33,10,661 equity shares or 2.68% in the Uday Kotak-backed bank.

At a share price of Rs 1756.55 apiece (September 22 closing price) the Canadian pension fund house's shareholding is valued at Rs 9,364.28 crore in Kotak Bank.

Kotak Bank has witnessed volatility so far in the current year, and its YTD performance is a decline of over 3%.

Apart from these stocks, the CPPIB also has stakes totalling a whopping $10 million in ICICI Bank. Also, it holds stakes worth $12 million and $22 million in US-listed Indian tech shares namely Infosys and Wipro. Other companies where CPPIB holds a stake are e-commerce giants Flipkart, Eruditus, Acko, Byju's, and VerSe. Additionally, they have strategic collaborations with Indian firms as well including Piramal Enterprises the Shapoorji Pallonji Group, and L&T Infrastructure Development among others.

As per the latest PTI report, a top government official recently said that the ongoing diplomatic row between India and Canada is unlikely to have any immediate effect on investment relations between the two countries. The official revealed that the Canadian pension funds are getting higher returns in India, and they have investments in the Indian infrastructure sector.

Overall, as of August 30, 2023, CPPIB's Indian investments are over Rs 1.77 lakh crore.

The official further said in the report that they don't see a reason for the Canadian pension funds to back out because of the current situation, which hopefully they expect to sort out. The official retriated that these Canadian pension funds cannot get such returns anywhere else, and hence, they do not see any impact on Canadian investments into India". A similar expectation is also for Indian investments in Canada.

Meanwhile, Arvinder Singh Nanda, Senior Vice President, of Master Capital Services said, "India-Canada relationship is deteriorating as both countries have declared the expulsion of each other's diplomats. It becomes important to watch the Investments of the Canadian Pension Plan Investment Board (CIPB) of Rs 1.74 lakh crore in India. It is expected that if this tension further escalates, it can create some pressure."

However, Jayden Ong, Senior Market Analyst, APAC, Vantage said, that Canadian pension funds such as CPPIB and CDPQ are the largest institutional investors in companies and projects in industries such as energy, infrastructure, and banking in India. Currently, India's economic system continues to expand, with GDP rising to 7.8%, and the Purchasing Managers Index also rising to 58.6. It is expected that the Indian market will continue to be active and will not be affected by the India-Canada feud.

Disclaimer:

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