Singapore's $680m visiting card in
India By Indrajit Basu
KOLKATA - In March this year, when ICICI Bank,
one of India's largest privately owned banks, invited Ho
Ching, the chief executive officer of Temasek Holdings
to speak at an investor conference in Singapore, one of
the conference's features that attracted Ching was its
theme. The invitation said "India Unlimited". "It struck
me as very appropriate as India and Indian companies
stand at the threshold of unlimited potential, growth
and opportunities," she said at the time.
And
going by the activities and investments of Temasek - the
somewhat secretive Singapore government investment
company that has an estimated US$75 billion in assets -
it appears that Ching is indeed India-struck. Over the
past eight months, this "piggy-bank" owned by the
Ministry of Finance has been investing aggressively to
emerge as one the largest private equity investors in
India. Moreover, its swiftness of investments has not
only created a stir in India's private equity investor
circles, but is also giving its rivals, as reports
suggest, sleepless nights.
Take a look at
Temasek's investments in India and it will be clear why
it is suddenly hot. It debuted in December last year
with the acquisition of a 5% stake in ICICI Bank for
$200 million, which it raised to 9% in May this year for
an additional $400 million. In the same month, it teamed
up with Newbridge Capital Partners to pick up 7.7% in
the Bangalore-based Matrix Labs, for an estimated $40
million. More recently - in August - it signed a deal
with the hospital chain Apollo Hospitals for a 5% stake
for about $10 million, and bought a 20% stake in ICICI
One Source, the bank's business process outsourcing
(BPO) arm for an estimated $30 million.
Although
Temasek refused to comment on any of its Indian deals
(which is why Asia Times Online had to depend on media
reports to arrive at Temasek's investment numbers),
analysts reckon that Temasek's direct investments
(listed above) along with its indirect ones that were
made through its proxy presence - like the Merlion India
Fund, the Delhi-based private equity firm Actis, West
Bridge Capital, Singapore Telecom's stake in Bharti
Televentures, etc - could well make it the single
biggest private equity investor in the country.
For Temasek though, such rankings don't appear
to matter. "We don't care about the how big we are ...
we are here to make money," says Manish Kejriwal of
Temasek Holdings Advisors, the Indian outfit of Temasek
that looks after its Indian interests. Instead, what
matters more, perhaps, is the fact that in the aftermath
of the Asian financial crisis of 1997, Asia is emerging
as "unlimited" for Temasek, and India "is clearly very
much part of the Asia growth story in the coming
decade".
Ching also says that while the "Asian
miracle is undoubtedly China, now is India's turn to
stir, standing at an inflexion point, after 10 years of
market liberalization and corporate restructuring". But
before going into the details of where exactly India
features in Temasek's gameplan, and why it has opened up
an office in India (in January) - the first and only
office outside Singapore - despite that its Asian
priority markets include China, Thailand, South Korea
and Malaysia, it is important to understand why Temasek
is stepping out of Singapore at all.
After all,
for almost 28 years out of its 30-year existence,
Temasek has been a provincial investor, investing only
in Singapore-based entities. For instance, Temasek has
investments in 40 of the island-state's largest
corporations, including Singapore Airlines, Singapore
Telecom, DBC Bank, Keppel Corporation, Singapore power,
and a host of other companies in infrastructure,
transport, leisure and technology sectors.
According to The Economist, the main reason for
Temasek seeking opportunities outside Singapore could be
that its return on investments at home is dropping - to
13% a year over the past decade from 18% earlier. For
instance, quoting a study by LEK Consultancy, the
Economist says that 22 major listed companies had made
an average return of only 1.7% a year since their
respective listings. "By contrast, GE, which does not
receive the same favorable treatment from a friendly
government, managed 27% a year over the same period,"
says The Economist.
But according to Ching that
may not be so. Although she admits that Temasek's
investment portfolios heavily focused on Singapore's
small and matured economy, she adds Temasek is now ready
to focus on investments which mirror the growth and
opportunities of the various emerging and developed
economies. "Temasek has to transform its portfolio from
a proxy for the Singapore gross domestic product, into a
balanced gross national product portfolio leveraging on
the growth and promise of Singapore, ASEAN [Association
of Southeast Asian Nations], Asia and the world," she
says, and hence, "Temasek is shifting its investment
stance from a Singapore-centric portfolio to a balanced
global portfolio of one-third Singapore, one-third Asia
outside of Japan and one-third developed economies,
including Japan."
It appears that Temasek's Asia
plan starts with deepening its connection with India, as
the opening of its office here indicates. "As an equity
house with the mandate to maximize long-term returns on
our investments, we are keen to deepen our connection
with India, as part of our wider interest in Asia,"
Ching says.
Its investment strategy in India is
carefully crafted out, as well. According to Ching,
Temasek is open to investing directly in Indian
companies, or, "we may co-invest with non-Indian
companies, who are also actively looking for
opportunities in India." Ching adds that Temasek may
co-invest with Indian companies, in companies that have
the potential to scale beyond their domestic markets to
reach into Asia or into the world. "Such co-investment
opportunities could include investments into the Indian
parent companies, or co-investments with them into third
countries," she says.
Temasek says that because
it is not a fund, there is no pressure to book profits
in a hurry. Its India strategy, then, will take "a
long-term view of opportunities and investments". At the
same time, Temasek could also add value to its portfolio
companies by promoting a sound corporate governance
framework as well as helping them "to build sustainable
value and be globally competitive".
Having
already pumped in an estimated $680 million in India
over the past few months, Temasek has indeed emerged as
a significant foreign direct investor in the country.
But these may be just for starters. "The fact that
Temasek maintains an office in India itself signifies
that its future plans are big," says Kejriwal. And
although he is not willing to put any figures just yet
on what he has up his sleeves, media reports and
industry sources suggest that deals worth over $1
billion are brewing already.
Ching agrees that
"Temasek looks forward to the opportunities to invest in
India and with India". And her gameplan here is not just
to make money but "also to participate in and contribute
to the growth and success of India's economy as a
long-term partner".
Indrajit Basu is a
Kolkata-based equity-analyst-turned-journalist with more
than 12 years of experience in business/finance and
technology journalism. Besides writing for Asia Times
Online, he also writes for US-based publications, as
well as IT companies.
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