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Temasek open to investing beyond $1 billion in India: Ravi Lambah

Temasek has recently doubled its “soft allocation” towards India and is now seeking investment opportunities beyond the $1 billion it has invested annually in the country over the past six years, said Ravi Lambah, head, investment group and head, India at Temasek. In an exclusive chat with Vinod Mahanta, Lambah talks about Temasek’s evolving investment thesis, confidence in India’s long-term growth story, the Manipal deal. Edited excerpts.

Can you share Temasek’s investment plans for the next 3-5 years?
We continue to focus on themes that we like, such as digitisation, which we think India is well-positioned for, and consumption, which we believe is important for the long term. We will also focus on life sciences and healthcare due to the significant requirements of the country. However, we must also consider global macro factors such as rising inflation and higher interest rates, which could impact equity markets.

In the near term, we are watching for these impacts, but long term, we are focusing on businesses with strong governance and management teams, profitability, or companies that are on a path to profitability. India’s fundamentals are strong, and we remain positive about India’s sustained and consistent policy framework, solid foreign exchange reserves, ongoing good corporate earnings, and strong banks. The private sector’s capex is slowly coming back, which is a good sign.

Temasek has invested around $1 billion in India every year. Are you looking at increasing India allocation?
In the last six years, we have been investing a billion dollars annually in India. Recently, we have sought to double that investment every year due to our belief that India’s fundamentals are solid and we would like to deploy more capital if we can find the right opportunities.

We have doubled our ‘soft allocation’ and are looking for opportunities beyond a billion. We are happy to put in more capital in India, but the amount will depend on finding the right opportunities. The firm’s underlying exposure to India is $16 billion, including indirect holdings, which is over 5% of Temasek’s global $297 billion portfolio.

How has the firm’s investment thesis evolved over the last two decades?
Our story in India has always been about consumption, which we see as an important part of the economic story playing out. For the last two decades, everything has stemmed from consumption: financial services, telecom, NBFCs, healthcare, agri-technology and consumer products. Beyond that, we focus on technology and have invested in the internet space, digitisation and early-stage companies.

The digital India story has been very interesting for us, and we have seen early investments play out as the digital economy has grown. We have invested in Zomato, Pine Labs and Ola, and these investments have played out as the sector has matured. We see agri as an excellent area for growth in India, given the high demand, fragile supply chains and bottlenecking that will create value. We may initially invest in a business with a smaller stake. If, during our holding period, the investment suits our long-term portfolio construction objectives, we may also double down on the investment. An example is our follow-on investment in Dr Agarwal’s Health Care.

How has Temasek’s India portfolio performed?
The India portfolio has been among the better performing portfolios due to the fact the country is growing and we have done well in India. Globally, our returns over the last 20 years have been around 10-15%. In the last decade, India’s portfolio has delivered double-digit growth.

What was the driver for making a fresh investment in Manipal Health Enterprises?
This investment aligns with our perspective on future structural trends in the area of healthcare and longevity.

Temasek has invested in a bunch of internet businesses. Are you still looking at investments even after the correction in valuations of loss-making internet companies, or are you taking a breather?
Our long-term investment approach sees the internet sector as a big beneficiary of digitisation. This is a long-term structural trend in India that we believe in. Unprofitable companies in internet-driven economy are not getting attention they received a few years ago when the market was bullish. Tech has rotated out of favour, especially when companies are not profitable.

The public markets’ lack of favour for unprofitable companies increases our ability to look at promising private companies. We can negotiate better investments and find strong management teams that we want to fund. We look at intrinsic value in our investments globally, not just in the internet sector. One important point to note is that many of the great, profitable companies globally were founded in an environment with high interest rates.

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