Temasek bets big on Indian e-commerce
In 2014, Temasek’s investment focus will be on unlisted firms across consumption driven sectors
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Mumbai: Unlike several foreign equity investors who have been struggling to exit from India investments, Temasek Holdings Pvt. Ltd, the investment arm of the Singapore government, is focusing on new investments in the country’s e-commerce sector.
After investing an undisclosed amount in Snapdeal.com in May, the firm is ready to stay invested in the e-commerce sector in India for the long term even as several firms jostle for the top slot. Snapdeal raised about $100 million from Premji Invest, Temasek and BlackRock Inc.
Snapdeal, promoted by New Delhi-based Jasper Infotech Pvt. Ltd, started in 2010 as a daily deals platform, selling coupons to groups of customers (similar to the Groupon model), but converted to a marketplace in late 2011, first offering services and then adding a wide range of products including clothes, books and electronics through merchants. The firm has raised over $233 million from investors so far this year.
“We like e-commerce a lot. We believe in offline to online conversion that is taking place. Market-wise, India is at a different level of development as compared to China and the US. The e-commerce market is still evolving…the story has just begun,” Rohit Sipahimalani, co-head, investment group head, India, Temasek, said in an interview on Wednesday.
Flipkart, Snapdeal and Amazon are some of the firms that have been competing to grab market share and funding from private equity (PE) investors. On Tuesday, Bangalore-based Flipkart raised $1 billion from existing investors including Tiger Global, Naspers and Government of Singapore Investment Corp., the city-state’s sovereign wealth fund. The latest round of funding, the largest-ever by an Indian start-up and among the largest-ever by any Internet start-up globally, values the firm at $7 billion, according to two people close to the development. So far, Flipkart has raised $1.78 billion.
On Wednesday, Amazon that launched its India online marketplace in June 2013, announced it will be investing an additional $2 billion to support the firm’s growth in the country. It did not give a time frame of the investment, but a spokesperson said it would be a “continuous flow allowing us to aggressively invest in growing our business and enhancing customer and seller experience”.
Even as the war for market share continues, Temasek is confident about its investment in Snapdeal. There is place for multiple firms to operate as the market is big enough, said Ravi Lambah, senior managing director, investment.
To be sure, firms such as Flipkart and Snapdeal are yet to break even.
Nomura in a 23 July report said it expects the Indian e-commerce market to quadruple from $10 billion in 2013 to $43 billion by 2018, backed by growth of online retail, which it expects will increase from $2 billion in 2013 to $23 billion five years later.
“People are looking at revenues now. Investors are making judgments. There is unlikely to be one winner. It is a fairly long runway. But investors look at it,” Lambah said.
The Singapore sovereign wealth fund has an exposure of about 4% of its $223 billion portfolio in India. Its direct investments in the country total $4 billion, about 2% of the total portfolio.
Sipahimalani of Temasek said in 2014, the firm will focus on investing in unlisted firms across consumption-driven sectors such as financial services, e-commerce, healthcare and agricultural services among others.
“Our medium- to long-term outlook on India is positive and we are not that focused on exits right now but on investments,” he said. “We remain in a sweet situation as we are long-term investors.”
The firm, however, exited its investment in Bangalore-based pharmaceutical firm Medreich Ltd in June after it was acquired by Japan’s Meiji Holdings Co. Ltd for Rs.1,720 crore. Temasek had invested Rs.109 crore in Medreich in 2005 for a 25% stake.