Earlier in July, Temasek Holdings, the sovereign wealth fund of Singapore government released its yearly investment review that said its India portfolio stands at around USD 10 billion. The company now plans to increase its portfolio in India.
Its net portfolio value at the end of March 2018 stood at USD 235 billion compared to USD 197 billion a year ago. According to media reports, Temasek’s India investments in the first three months of 2018 was around USD 1.5 billion.
“We continue to see India as an attractive market and are looking to increase our exposure over the long term. We’ve invested on average USD 1billion per year in India, over the last five years,” a Temasek spokesperson said in an email response to the queries sent by The Passage.
According to Ashish Taneja, managing director at GrowX Ventures, a Delhi-based early stage investor, the investment of a billion and a half US dollars is nothing for a PE firm like Temasek. However, he also mentioned that in comparison, other PE firms such as BlackRock or KKR (Kohlberg Kravis Roberts) are also investing in single digit billion dollars.
“One would expect more strategic investments and public-private partnerships from Temasek. I would say the market in India is just opening up,” Taneja said.
The Singapore government-owned PE firm maintains its stance of being sector agnostic and claims to have a “positive bias” instead of any sector bias. Apart from investing directly in companies, it also disburses its funds through other venture debt fund houses and joint ventures, such as InnoVen Capital, Ascendas-Singbridge Group and Sheares Healthcare.
With the help of its joint venture with Ascendas-Singbridge Group, Temasek plans to increase its presence in the growing real estate market in India. According to a report in The Economic Times, Temasek Holdings and Ascendas-Singbridge Group have plans to expand the presence of their joint venture in India’s growing warehouse and industrial real estate market, aiming to increase their portfolio almost threefold in the next five years.
Fingers dipped in all bowls
Temasek’s portfolio in India largely has late-stage companies and is spread in varied sectors such as infrastructure, logistics, real-estate, healthcare, consumer internet and finance, among others. Temasek said when it invests in a company it does it with an intention of long-term investment and is ready to wait for more than 10 years before it looks for an exit.
“Rather than looking at ‘focus sectors’, it is more useful to understand that we look for opportunities along longer-term trends. These trends include the evolving consumption patterns of the Indian consumer, and the technological advances are disrupting and transforming businesses today. These cut across many sectors—from industrials and financial services to life sciences and new economy segments such as consumer internet and fintech,” the Temasek spokesperson said.
On the condition of anonymity, a senior executive at InnoVen Capital, a Temasek-owned venture debt provider through which Temasek invests in early-stage companies in India said, “Temasek does a lot of things in India, right from private equity to early-stage investments to venture debt. It runs a lot of schemes in India and also makes investments in late-stage internet companies that are fairly mature and evolved.”
Its latest investment bets in India include an investment of USD 147 million each in financial services business AU Small Finance Bank and port operator Adani Ports. “If you look at the infrastructure sector in India for the last 2-3 years, the government is pushing really hard to build better highways and roads. Ports are getting developed; rail corridors are getting strengthened and better opportunities of linking India with other trade partners are being created. So, there is an opportunity for PE firms like Temasek to partner at that level,” Taneja explained.
Looking at the portfolio companies of Temasek, it’s clear healthcare is another sector that it considers big and important. It invested USD 50 million in Asia Healthcare Holdings (AHH), a healthcare platform owned by US private equity fund TPG Capital. It also owns a minority stake in large hospitals such as Manipal Hospitals, Medanta and Bangalore-based cancer care hospital chain HealthCare Global Enterprises.
“For large PE firms healthcare has huge opportunity as a sector. Penetration of hospitals in India is abysmally low. Even in a city like Mumbai you can count the number of good hospitals on your fingers. There a lot of these single hospital ventures. If investment firms are given the opportunity, they will try to create a chain out of them,” Taneja said.
The payments technology company Pine Labs also attracted funds from Temasek this year, which saw the participation from American online payment platform Paypal.
Global investment strategy
In 2018 Temasek invested USD 22 billion and divested USD 12 billion across categories, resulting in net divestment of USD 10 billion. Temasek’s yearly report of 2017 showed its net divestment clocked only USD 1.46 billion.
Globally, the US continues to get the largest share of Temasek’s new investments. In Asia, Singapore is the largest market for it. In China, it invested in companies such as Ctrip, and ZTO Express.
Temasek said it maintains a ratio of 60:40 when it comes to investing in mature and growing economies. Temasek counts South-East Asian countries, Latin America, India and Africa as transforming or growing economies with promising growth.
It said, for a company to be considered to get invested, it must either be in a sector that caters to growing income population or it should have a game-changing product/solution with a distinct edge over its competitors. In case of an early-stage startup it must have market disruptive qualities and show growth potential from the beginning. Once a company fits any of these requirements, Temasek looks at it with much more detail, examining factors around its business to understand its true value.
“We don’t have specific sector allocations or targets, and we are open to opportunities across various sectors as long as they meet our intrinsic value test,” Temasek said.
As investors see India as a market that is still growing, PE firms such as Temasek will continue to attract funds, either directly or through their funds of funds (FoF). “India is the target market for investors across the globe. With the right political structure and strong leadership, there is no reason to believe why we won’t attract more dollars,” Taneja said.
After the article was published, Temasek has sent a clarification. We reproduce it here:
While Temasek does make private equity investments, we are not purely a PE firm. We are a bottom up investor and our investment decisions are based on our intrinsic value test. This means we have the flexibility to explore commercial opportunities across both public and private equity spheres, and across geographies and sectors, as long as their value proposition is compelling. In fact, as of 31 March 2018, we have only 39% unlisted assets vs 61% listed assets in our portfolio.
The activities of Innoven are independent of Temasek and they are run by their own board and management team. This means that we do not direct the investments decisions of Innoven, nor do we invest in early-stage companies through them. Furthermore, Innoven is a joint-venture between Temasek and UOB, and not solely owned by Temasek.