Temasek Holdings to Invest $10 Billion in India Over 3 Years

Yes, Temasek is betting big on India

Indian markets are exciting and the best example of exciting times are the volume and colour of FPI flows. In the months of May and June, the FPIs have infused $11 billion into Indian equities. In the first fortnight of July 2023, FPIs infused another $3.9 billion into Indian equities taking their total infusion to $15 billion in 75 days. Big global funds are getting interested in the India story and that is hardly surprising. 

After all, with the problems in China and most global companies following the China Plus One strategy, the focus is back on India. The focus is not just as a portfolio investment destination but also as key link in the global value and supply chain. It is in this context that the latest story of Temasek looking to increase its investments in India assumes significance.

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Table of Contents

1. Yes, Temasek is betting big on India
2. Why Temasek finds India exciting
3. Here is what the Temasek India head believes
4. Temasek feels India showed resilience
5. Preferred sectors for Temasek

Why Temasek finds India exciting

Temasek Holdings needs no introduction to global investors and fund managers. It is not just a formidable name in global investments but also one of the most sought after long-only sovereign fund owned by the Government of Singapore. Temasek has a total portfolio of $287 billion of which nearly $17 billion, or 6%, is invested in India. That is a reasonable share especially considering that India had a share of just about 3% 5 years ago. 

Now Temasek has decided to scale up its India equity investments by another $10 billion in the next 3 years and may even take its India share in the global equity portfolio up to 10%. After all, in FY23 when the global portfolio of Temasek had given negative returns, it was the India portfolio that had held its nose up with positive returns. Temasek wants to up the ante when on its India strategy and is betting on a combination of stable government policy, attractive demographics, and high-quality entrepreneurs.

Here is what the Temasek India head believes

Temasek’s India portfolio, led by Vishesh Shrivastava and Mohit Bhandari, reflects strong confidence in the India growth story. Their recent $2 billion investment in Manipal Hospitals highlights a clear focus on healthtech, alongside stakes in digital players like Zomato and Policybazaar. Temasek is also eyeing long-term opportunities in energy transition and decarbonisation.

Despite a $6 billion global loss in FY23 (vs. $8 billion profit in FY22), the India portfolio remained profitable. The optimism stems from rising per capita income (expected to double in the coming years), a young demographic, stable macro policies like GST and PLI, and a strong entrepreneurial ecosystem in India.

Temasek feels India showed resilience

Temasek leaders believe India has managed the shift from easy capital to a more cautious funding environment well. Post-pandemic, abundant capital led to inflated digital valuations, but today’s investors demand profitability or a clear path to it. Indian companies have adapted by focusing on cost control, better storytelling, and meaningful market communication.

While some investors may wait for election outcomes, Temasek follows a bottom-up approach. Their key investment filters include large addressable markets, strong management, governance, customer engagement, and profitability visibility.

Preferred sectors for Temasek

Temasek has a presence in a plethora of listed Indian companies including Larsen & Toubro, Adani Ports, Devyani International and Maruti Suzuki. However, Temasek has given insights into its tome for selecting and investing in companies predicated on 4 key parameters.

• The first big investment trend is betting on the future of consumption. That is logical. As purchasing power increases, consumption gets a boost and India is already a highly consumer-driven GDP market. The strategy for Temasek is to follow that trend and keep investing. This would include sectors like FMCG, retail, banking, consumer goods etc.
   
• The second big trend that Temasek is betting on is digitisation. It is not just about new-age ideas like generative AI, machine learning and cloud but also about how the Indian economy is increasingly adapting to become an internet economy. That would include ecommerce players, IT players, ITES players etc. 
   
• The third trend is towards increasing lifespans which logically translates into healthcare services portfolio, diagnostics, pharma, and biotech. Pharma and assorted activities had done a lot and are likely to do a lot more to expand life spans and these are the healthcare stories that Temasek is betting on.
   
• Finally, Temasek is also betting big on sustainability. This includes sustainability enablers and sustainable living. This throws up a plethora of investment opportunities in areas like energy transition, green energy, decarbonization. The list can go on!