Temasek’s exposure to India higher than it has ever been: MD Promeet Ghosh
Ravi Lambah, senior managing director, investment group head, telecom, media and technology joint head, India; and Promeet Ghosh, managing director, India at Singapore’s state-run investment firm Temasek Holdings, talk about investment opportunities, distressed assets and Temasek’s India strategy. Edited excerpts from an interview:
How does India stack up in the scheme of things for Temasek? Has the India exposure increased and what is your outlook for India?
Lambah: India has grown for us in terms of exposure. About 5% of our exposure is in India now. We continue to have a positive bias towards what’s happening here. The macro, policy, longer term trends, we are positive about that. We are still looking to grow our investments in India.
Ghosh: We’ve articulated previously that we have been investing about a billion dollars a year. We continue to be active in India, we continue to step up our exposure in India. Our exposure to India is now the highest that it has ever been.
Do you think that India is better placed than other Asian markets?
Lambah: We think India is better from a few perspectives. If you look at policy, and if you compare the ability to absorb shocks that may come from outside or inside, India is better placed. We think India is better placed than other Asian markets both on the pace of the economy and the ability to absorb shocks that might come, because it’s just a more domestic consumption driven economy.
But Indian markets are at an all time high. Does that concern you?
Lambah: The market has risen a lot, but ultimately it is all relative, relative to growth, relative to future prospects, relative to what each company is positioned for. We have seen some significant positive moves in policy such as GST (goods and services tax). FDI (foreign direct investment) is running a pretty significant clip.
So when we look at the macro, we look at the policies and we look at corporate performance, it all seems pretty good. Although there are certain things that still have to be taken care of.
India is still the fastest growing economy in the world. It is growing at 7% plus. So while valuations are high, you have to take the view whether you want to hold because there is more growth coming, or you want to trim or reinvest.
Are you exploring opportunities in the distressed assets space, which is a very popular theme these days given the huge non-performing assets (NPAs) mess in the Indian banking system?
Lambah: From our perspective, where there is stress on the balance sheet, but fundamentally good businesses, which need equity to solve the balance sheet, is obviously something that we will look at.
But when it comes to setting up an ARC (asset reconstruction company), setting up a debt restructuring platform, that’s not our business. But if the ARC or a debt restructuring platform needs to raise equity then we will look at it like any other equity investment.
We could buy equity in a bank which is cleaning up NPAs. So there are many ways for us to play it, but we are not going to own a majority in a company that is the business of restructuring company’s debts. We are not going to run an ARC in India.
We are seeing a major consolidation wave in several sectors. As an investor, how do you see this playing out for you?
Lambah: Consolidation can be good or it could be bad. Every consolidation is not good. It comes with execution and a lot of other risks as well.
If we are already invested in a company which is undergoing consolidation, we will see how it plays out. If it is going to be good we have no reason to sell. If we see that the consolidation has been done at a price which maximises the value of our investment and we see an opportunity to sell, then we will exit.
We don’t think we have predetermined approach to what we will do with our equity positions in companies that are undergoing consolidation.
What’s your view on the IDFC-Shriram merger, given that you are an investor in Shriram Transport Finance Co.?
Lambah: It’s an investment we made sometime back. We have reduced our stake. We will see where the consolidation goes. If it gets done, if it’s positive, we will then decide what we want to do. But we are positively biased towards that sector.
In the e-commerce space, you have exposure to Snapdeal which is going through tough times. Is there any regret?
Lambah: E-commerce as a trend, as an industry, we are very positively biased towards. We have e-commerce investments globally in China, Europe, US, Latin America, Southeast Asia and India.
In each of these, we have gone in early. Some of them have played out well and some have not. But it has generally been a positive result in e-commerce so far.
If you look at the India market, we had an early investment, a small one, in Snapdeal. We also announced recently that we have invested in Amazon, at the public level. So as far as India e-commerce is playing out, we are invested. And I think we continue to see the benefit of Indian e-commerce growth.
From a deal making perspective, especially on the larger end of the spectrum, are you seeing more competition in the market, given that several sovereigns and pension funds have become very active?
Lambah: The market is expanding. The market is becoming more and more relevant for investors like that to come in and different asset classes are being established. For example there is a lot of interest of sovereign wealth funds in infrastructure. There is a lot of activity in real estate. If you look 10 years back, this was not a destination for equity.
Is investing in India competitive—yes, of course it is competitive.
But ultimately the market is expanding and there are more opportunities to invest and therefore it comes down individual equity investors—do you want to compete and bid up the asset or you don’t. All of us have our own discipline.
And if it is going to be competitive, if it is going to be expensive, we just won’t invest. Our whole focus is to present ourselves differently. We are more patient capital. We invest for the longer term. We have value to bring beyond just the equity.