Temasek, which is looking to invest $10 billion over the next three years if the right deals come its way, is betting big on the consumption space. Ravi Lambah, Head, Strategic Initiatives, Head, India, Temasek, tells Raghavendra Kamath that while valuations in India may be a few standard deviations higher than in other markets, the growth is here and efficiency is being created. Lambah believes one is seeing a whole new paradigm in India which is creating opportunities. Excerpts:
In which spaces are the opportunities today?
We’ve been here for more than 20 years and about 30-40% of our portfolio is in financial services, primarily banks, as well as newer areas like insurance, which is just taking off. We’ve also put money in telecom, healthcare, consumer, and tech. We are basically underwriting the Indian consumer. As the economy grows from roughly $3 trillion to $5 trillion, the gains will come from consumption and flow to consumption.
Within the consumer space, which are the exciting spots?
There are two main areas that we look at in consumer space: on the tech side, such as in Eternal or Policybazaar where we invested early on when they were pre-IPO startups; and on the branded side, for example our investment in Haldiram’s. We would like to do more in brands if we can get them at the right price. We like brands that are well- known to a broad consumer base, and we also see luxury brands developing in India. We think retail is growing, both offline and online, and so we will try and do more in retail where we haven’t done as much, including the infrastructure that makes omnichannel work.
There is high aggregate demand in some sectors but profits are split across players…
That depends on the sector you are looking at. In healthcare, for instance, we first invested a minority stake in Manipal when it was much smaller, then we moved to a majority stake where we could be more hands-on, help scale and create greater long-term value. In that journey, there was a lot of consolidation in the space – not just with us, but others were acquiring and consolidating small chains. Manipal scaled as it recently acquired Sahyadri Hospital in Pune. Same for Medica Synergie in the east. Many of those hospitals were profitable, but this was an opportunity to scale further.
There was also recent news about your partnership with Schneider Electric India…
Yes. Partnerships matter to us, and they can help drive strong value creation. This was about partnering a world-class operator with deep local expertise. Our thesis was to help build an India‑based electrification champion by combining Schneider’s global low‑voltage and automation tech with L&T E&A’s brand, manufacturing and distribution. We protected channels with a “two brands, two sales” approach, scaled the India hub, and benefitted from post‑COVID tailwinds. By 2024, India was Schneider’s third‑largest market and a global hub. Earlier this year, Schneider decided to take full ownership and we agreed to sell our 35% stake—reflecting the value created—subject to approvals.
What about tech consumer space, beauty for instance?
Beauty as a segment remains fragmented and D2C is not easy to build because you need to burn capital to scale. But once you scale then you can defend the space as new entrants must repeat the same journey. What’s happening is that consumption is forming its own following, there is a segment of the population that stays with one price point and is aspirationally trying to move up to the next point. But the question is which company do you underwrite? We prefer not to play that niche game. We want to underwrite the consumer on a broad base.
How do you play the consumer tech space?
We’ll choose segments accordingly and avoid areas that are hard to consolidate. We are long-term in our outlook. We’re not a fund, so we can stay invested in cycles, and we can keep investing more when the opportunity arises. We have “old-economy” businesses that are trying to digitize faster and there is a new income stream they will get and so we’re trying to focus our portfolio on that as against buying a native digital business because not many have scaled.
Could you please elaborate on this?
I’m talking about digitising of companies to access the Internet better, for both B2B and B2C businesses. Also, the legacy companies also have strong distribution channels which need attention and if they can work on those, the value is there. The question is how to access the demand best. Everything doesn’t have to be always online. You don’t have to go online. There is a lot of offline consumption in India. Both will have to grow.
Valuations right now seem unaffordable…
Sometimes we’ll wait. We are really guided by our intrinsic value test. If that test tells us that we should buy, we make an investment. That’s basically an assessment of the future. No one is smart enough to know what will happen but we make an educated call based on the business trajectory. Valuations in India are a few standard deviations higher than in many other markets but the growth is here and efficiency is being created, through infrastructure and companies will benefit. India’s GDP growth is still among the fastest in major economies. And since everyone is seeing this, valuations are higher. You are seeing a whole new paradigm in India where you can invest behind. As a long-term investor, short-term fluctuations in valuation are less of a concern for us.
Do you think family-owned businesses are more open to selling stakes today than they were before?
There are two or three trends which is why we are focused on creating partnerships with families. There are families where the new generation is not interested in continuing with the traditional family business. So, there is clearly an opportunity because they want to do other things with their time. Then there’s that other segment where the next generation is very keen to grow but they are not at the stage where they can go public. If they were to grow that business in the next 4-5 years, there’s a lot more value to be created. Once you’re public, you have to manage market expectations quarter by quarter. But if you do it year by year, invest, and maybe even slow down profits it’s better to do it privately. But they don’t have the capital and that creates the opportunity.
What about families where the next generation is involved?
And then there’s the larger businesses where the next generation is involved, they’re keen to go forward but they need to improve financial discipline, go to new markets, but they don’t have the bandwidth so they need an investor to come in and help. What’s changed is that there’s capital from private sources and there are opportunities for the new generation to do things.
What do you feel about some of the younger generation not wanting to build but instead invest?
I would not generalise. This generation perhaps has a new lens on where they think value will be created. Perhaps that will not be from the traditional businesses. Maybe there’s faster value to be created if you were to capture the AI revolution. But, it’s hard to set up a business that’s going to benefit from AI so perhaps it’s easier to invest. Over time, maybe you build businesses too that are in native AI. It’s happening elsewhere and you will see activity in native AI in India too.
So, they’re looking to invest in AI?
There are trying to figure out how to play the AI game. There’s a paradigm shift of how risk is being assessed in businesses which can be quickly disrupted by AI. There’s a huge opportunity of investment in AI that will benefit from AI. Also, doing business requires a certain amount of tenacity and investing requires a different kind of tenacity. So some are saying they prefer to be investors and have calibrated exposure across businesses as opposed to just one. There are so many ways in which families are evolving.
Is Temasek on track to invest what it had planned to?
We had said we would look to invest $10 billion over a three-year period if we find the opportunity, so that’s about $3 billion a year, give or take. Last year we hit $3 billion plus with some big investments like VFS Global and Haldiram. This year is still ongoing, so let’s see. The opportunities remain significant.
Do you see any risks to this big opportunity?
There are always risks. We’re seeing some slowdown in the SME/MME space that could impact some demand and credit growth. It requires attention and attention is being paid from the Central Bank and lenders. On geopolitics, settling the current uncertainties would help — uncertainty creates volatility. If that noise eases, we can act with more confidence. Beyond that, government policy has been consistent; the economy is growing well; monetary policy has been managed strongly; FX reserves are strong. So, the risks don’t look systemic. Flows into the markets via SIPs is strong, that’s important. The risk is probably at the company-specific level.
Consumption has slowed…
Any economy needs tools to sustain growth. In India, the government has implemented tools such as tax measures and liquidity management. Consumption may have slowed, but what is driving growth is infrastructure spend. Also profitability of companies is improving, domestic capital formation is phenomenal and helps access to capital. There’s also focus on upskilling and moving the workforce to Industry 4.0. It’s a journey. Until then, you use policy and financial tools to keep growth going and avoid shocks.
Last year, India was 8% of your global portfolio. Where do you see it in 2030?
We’re bottom‑up investors and invest capital wherever the opportunity is globally. How much that is as a relative share of the global portfolio thus depends on our activities in other markets too. But today, given the opportunity in India, we are investing more in India than we did in the past, and we see our India exposure going up.