Temasek plans concentrated bets as India portfolio hits $50 billion in assets
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Temasek Holdings will make concentrated and larger bets in India, a top executive said as the Singapore state investor hit a record $50 billion assets under management with its portfolio in India.
The firm is likely to maintain its pace of deploying capital this year, averaging around $3 billion, said Ravi Lambah, head, strategic initiatives and head, India, for Temasek, in an interview with Mint. Last year, Temasek put $3 billion to work in public and private markets in India.
In 2023, Temasek had said that it expected to invest around $10 billion in India over three years.
'The threshold for investment across the board has increased," said Lambah. Temasek is now in favour of bigger, more concentrated bets that will help the firm manage its growing portfolio better, he added.
The investment firm also sees rising opportunities in backing family-run businesses, where it has found its strength and sweet spot in recent years.
Last year, Temasek invested more than $1 billion for a 10% stake in Agarwal family-backed Haldiram Food International Pvt. Ltd, and around $2 billion for a majority control of Pai-family operated Manipal Health Enterprises.
Temasek expects to continue making similar larger bets, with its sweet spot in investment size measuring $200-250 million. 'But $50 million investments would be a huge exception, just because we don't have the capacity to manage such a large portfolio anymore," Lambah said.
Temasek, being a state sponsored investment firm, has a lower cost of capital than many of its private equity peers, giving it an edge to pay top dollars for companies it believes will compound over the long term.
'Our cost of capital is not very low as compared to others. Having said that, we will more likely pay more for investments where we have a strong established thesis and a clear path of seeing it compounding well for us," Lambah said.
This may mean that in the technology and digital sector, Temasek may skip Series B or Series C investment rounds, opting for later-stage Series D and Series E investment rounds, Lambah said.
Temasek has had mixed success with its early bets in India, with some of its portfolio companies such as Unacademy and Fi Money facing growth headwinds.
Also, India does not have many early-stage opportunities that can attract an investor like Temasek.
'There is an early technology team (that sits out of Singapore and West Coast of US) that is very focussed on the technology space and artificial intelligence. Those opportunities (in deep tech) we don't see in India yet," Lambah added.
So far this year, the investor has had a sweet run with its India portfolio soaring to $50 billion, up from $37 billion last year. This is a consequence of growth in underlying portfolio value and putting in new capital.
Apart from India, Temasek largely invests across the US, Singapore, and China, and has recently begun increasing exposure to Japan, Lambah said.
'You will see us putting more capital in companies where we see compound returns over a long period of time," Lambah said.
India is going through a positive macro condition for a sustained period of time, which is providing a positive certainty. Capital markets are also getting more efficient and deeper.
'All of this is obviously a consequence of policy, execution and oversight, creating a more business friendly environment," Lambah said.
The deepening of public markets has allowed Temasek to also book profits. Over the past year, the investment firm has made divestments of about $1 billion, including by exiting its stake in O2 Power, its joint venture with EQT, to JSW Neo Energy.
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