Temasek wary of inflation, but funding to continue

Reaffirms India as a key investment destination, owing to both present growth and potential.

Temasek Holdings (Pvt) Ltd, the investment company owned by the government of Singapore, will continue its big-ticket investments in India as a long-term investor. It remains cautious on regulatory issues and on high inflation in the country.

Its annual performance review, issued today, says inflation in India is structurally higher due to supply-side bottlenecks and changing consumption patterns. “The growth-inflation tradeoff is a crucial question for the government, but even the more bearish analysts expect growth to be 7.5 per cent in March 2012,” it said.

Covering the financial year ended March 31 this year, Temasek Review 2011 reports a record year-end portfolio value of $157 billion, up from $151 bn in the previous year.

Manish Kejriwal, head, India, said: “Globally and within Asia, India remains one of the fastest growing economies and continues to be one of our key investment destinations. We believe in the long-term potential of the Indian economy, owing to its strong domestic consumption, increasing savings, conservative corporate balance sheets and resilient banking system. Inflation has, however, emerged a significant threat.”

In India, Temasek invested $200 million in GMR Energy, giving it a significant exposure to the growing power sector. Kejriwal said, “GMR is one good example of how Temasek is investing in India’s transforming economy, in a sector that will not only support growing industrial needs, but also the needs of a fast growing middle income population, that will drive demand for power and other goods and services. Temasek also invested $175 mn in National Stock Exchange of India.

It has invested about $3 bn (Rs 13,500 crore) in India since 2005. By the end of 2010, it had bought three per cent in Max India for about $27 mn from the open market. “Our investments reaffirm our belief in financial services as one of the best proxies to the growth of the economy,” he added.

 

 

 

Its major investments through the open market include ICICI Bank and Bharti Airtel. In 2007, it invested about $2 bn to acquire five per cent in Bharti Airtel. In 2006, it bought close to 10 per cent in Tata Teleservices (Maharashtra) from the market. “Besides these core private equity investments, we have also been very active on the public market side, including investing in companies like Coal India, Engineers India, Essar Energy, Jain Irrigation and Muthoot Finance and Max India. Among our significant divestments, we divested our five per cent stake in Mahindra & Mahindra during the year,” Kejriwal added. Temasek ended the year with a portfolio exposure of 77 per cent to Asia, including 32 per cent in Singapore.