New Delhi: Saudi Arabia and India have established a joint fund aimed at investing in Indian innovations and the startup ecosystem, with a focus on strategic sectors. New Delhi recently proposed a Saudi Arabia-India Cooperation Fund (SAICF) of over $2 billion, modelled after the UK-India Development Cooperation Fund.
Last month, India released a blueprint for the SAICF, starting with a $500 million Fund of Funds (FOF). This would be a pooled investment fund where both governments will invest in an agreed proportion. The FOF would then invest an average of $20-25 million in daughter funds, which, in turn, would invest in 15 to 25 startups and growth companies.
However, the FOF’s commitment to any daughter fund would be capped at one-third of the latter’s size to minimise commercial and concentration-related risks. These daughter funds would be managed by reputable fund managers, while both the FOF and the daughter funds will be regulated by the Securities and Exchange Board of India.
“Further investment guidelines can be developed following a round of consultations with internal stakeholders and market participants,” says the proposal, which views the FOF as the fastest option to set up within six months.In the meantime, the proposal suggests that thematic platforms could be identified and established to start committing capital within 12-15 months. “At the final stage, direct investments would begin, with the first investment targeted for 18 months after the fund’s inception,” it adds.
Thematic platforms would focus on direct portfolio investments in areas of strategic interest to Saudi Arabia, such as innovation, climate tech, clean energy, defence, or space tech, with a fund of over $500 million.
“The proposal is to collaborate with Saudi Arabia and internal stakeholders to identify strategic areas of interest and to create 3-5 thematic platforms. Each platform will have a corpus of $150-300 million, managed by investment teams with sectoral expertise,” it states.The largest funding—$1 billion—is earmarked for 10-20 commercially successful and strategically important companies identified through the FOF and thematic platforms.“At least some of the startups or growth companies that receive funding through the FOF or thematic platforms are expected to be both commercially successful and strategically important. SAICF can reserve a pool of capital to directly invest in such companies,” the proposal states.
“Given that these are likely to be growth companies, 10-20 such investments could be targeted over 3-5 years, with an estimated average investment size of $50-100 million each. Examples include new climate technologies, healthcare discoveries or delivery models, drone technologies, cybersecurity, quantum computing, AI-led innovations, and more,” it added.Saudi investments in India currently exceed $3.22 billion, primarily through the government-owned Public Investment Fund in Indian companies beyond the startup stage.In September 2023, Saudi Arabia’s Investment Minister Khalid A Al-Falih underlined his country’s interest in leveraging its sovereign wealth fund to facilitate investments in India, including through venture capital in Indian startups.