Citi India has enabled an investment for South Africa's Sanlam into India, a key breakthrough via the use of the QFI scheme, it said.

In a move that it described as a key breakthrough to the India market, Citi India has acted as a Qualified Depository Participant, custodian and the execution broker for an investment made by Sanlam, one of South Africa’s largest financial services groups, through the Qualified Foreign Investor scheme.

The investment of around $111 million is the largest investment made by a QFI in India, since the easing of QFI regulations for investing in Indian equities over the past few quarters, Citi said in a statement released yesterday.

The transaction, the first of its kind supported by a foreign bank custodian in India, reinforces the efforts of the government of India to allow QFIs to directly invest in the Indian equity market.

“This was an important investment in a group company of one of our long standing partners in India, said Gerrit Van Heerde, chief financial officer of Sanlam emerging markets.

“The investment made through the QFI scheme ably supported by Citi India, demonstrates the capabilities of its people and platform in making an extremely difficult deal become reality. The advantages of the QFI scheme are immense in time sensitive deals as this one,” he continued.

Debopama Sen, country head of securities and fund services for Citi India said: “Citi continues to actively engage in discussions with regulators and investors across diverse forums, highlighting the multiple benefits of a simplified QFI framework as one of the preferred investment routes into the Indian markets.”

 Benefits of QFI

The National Securities Depositary’s managing director and chief executive, Gagan Rai, said Citi is among its first custodian partners who have been educating investors on newer formats of investment like the recently simplified QFI scheme.                               

He added: “Post this transaction current investments stand at approximately INR 6.8 billion ($126 million) in Indian equities and INR 4.4 billion ($82 million) in fixed income though this investment route. We are confident that investments will significantly increase over the year as investors understand the many benefits of investing as a QFI.”

The QFI framework simplified India access for foreign investors who are members of the Financial Action Task Force jurisdictions, allowing them to invest in India without being registered with the Securities and Exchange Board of India, or meeting the set eligibility criteria for a Foreign Institutional Investor or Sub-Account in India.

Attracting investment

To encourage the use of this investment route, Citi said it has been in active discussions with various potential QFIs and regulators, to simplify the requirements further and attract fresh investments under this scheme.

The revised guidelines announced by the government of India permits QFIs to open a segregated bank account in India and allow QDPs to rely on authorised intermediaries like Global Custodians to verify certain documents. These changes in regulations are expected to widen the class of foreign investors and deepen the Indian capital market, thereby helping reduce market volatility in the equity markets, Citi said.