Temasek bullish on Indian start-ups, renew energy despite slowdown overseas

Top executives of Temasek, which has doubled its India portfolio in the past five years to $16 billion, said the fund made several successful exits from India in FY 22

One of the world’s biggest investors, Temasek, will continue to look for investment opportunities in Indian start-ups and renewable energy sector despite a deterioration in the global economic outlook.

Top executives of the Singapore state-owned fund, which has doubled its India portfolio in the past five years to $16 billion, said the fund made several successful exits from India in the financial year ended March 2022 with the listing of several tech-led companies like PolicyBazaar and with strategic sale.

“In the long term, we are optimistic about India, which is the fastest-growing in Temasek’s portfolio due to its huge market,” Temasek Managing Director Vishesh Shrivastav said in an interview.  

Shrivastav explained that the themes around which Temasek works resonate well in India. “Some of the key themes governing our investment focus are digitisation, future of consumption, and sustainable living. We find that there is a lot of resonance for these themes for India, specifically. And that drives some of our optimism. Our India portfolio also has been quite resilient so far. More importantly, India probably is going to be one of the fastest-growing large economies globally,” he added.

On Monday, the fund said downturns in China and the technology sector, in particular, impacted its performance with shareholders' return at just 5.8 per cent in the financial year ended March – a sharp decline from 24.5 per cent reported for the previous year. The company did not give India specific returns figures.

When asked how the company sees the current meltdown in the start-up ecosystem and how it is evaluating its investment plans, Shrivastav said Temasek looks at investments from a long-term horizon.

“We have been an investor in the Indian start-up ecosystem from the earlier part of the last decade. The macro will keep changing, but if you have a long enough term view, then some of these issues get evened out. We look at our early stage portfolio as being a great value driver for our India portfolio historically, and it gives us a lot of other benefits as well. Also, since we invest from our balance sheet we have the ability to ride out such fluctuations,” he said.

The value of the global portfolio of Temasek, which is an early investor in India since the early 2000s, has more than doubled to $287 billion, mainly due to its big bets on the technology sector and China. The India portfolio has remained resilient so far and will continue to remain a focus area for the fund, said Mohit Bhandari, also a managing director at Temasek. 

The company has invested in HDFC and HDFC Bank (both are in news for acquisitions and merger) and Axis Bank. The companies are doing well and Temasek will continue to remain invested, the officials said.

The fund will look for investment opportunities in the areas of digitalisation, block chain companies, SAAS, and sustainability. “We are not investing in crypto currency companies but we think there is a huge opportunity in blockchain companies that are trying to find solutions across various sectors,” Shrivastav said. “We are more focused on how blockchain companies are finding solutions for media, trade finance companies, and we have set up a team for blockchain approach,” he said.

The innovation in the digital world will always be in conflict with the regulations in the initial stage and in the long term both innovation and regulation will have to work simultaneously, the official said. This was also for the Indian regulatory environment when it comes to investing in the fintech world. “When it comes to our investment thesis in finance, we are clear that financial services have to align with the RBI,” said Bhandari.

The officials said the weakening rupee has impacted their returns but they have taken -4-5 per cent depreciation of the Indian currency into account while making investments in the country. “We have been an investor for a very long time and we take into account the fluctuations and volatility in currency while making investments. We get the benefit of having a very long term view,” Shrivastav said.

Temasek is also an investor in Zilingo, which has been in the news as its founder was asked to go and now the company is on its way to liquidation. Without giving out any specific response, Shrivastav said: “Corporate governance is a key focus area for us. We expect all our boards and management teams to abide by the highest standards of governance. It would be unfair to comment on a specific situation. The board is deliberating on what is the best outcome for all stakeholders going forward, and we are engaged with them.”

PRESENCE IN INDIA
 

• Total investment in India stands at $16 billion
• Investments doubled in India over 5 years
• 4 portfolio firms got listed last year; 1 strategic buyout
• >5% exposure in India based on underlying assets as of March 31, 2022
• Agri-tech, sustainability will be focus areas along with other investment segments
• Ola, Billdesk, Zomato, Pine labs, Policy Bazaar, PharmEasy, Licious, Lenskart, DeHaat, upGrad, Unacademy are some investments