Sitting comfortable on a net cash position, with $156.4 billion, Temasek Holdings, the Singapore government?s investment arm, is looking to make the most of the current volatile market. Says Rohit Sipahimalani, head of Temasek India: ?This is a time when we should be buying rather than selling. As Temasek doesn’t have timing pressure of selling, we would like to buy when markets are weak and sell when markets are robust.? Within India, Temasek has investments in Bharti Airtel, ICICI Bank, Godrej Consumer Products, National Stock Exchange, Tata Sky, and GMR Energy, among others. In February, Temasek had an partial exit from ICICI bank, an investment it made in 2004, however, it plans to stay invested in Bharti Airtel in which Temasek invested in 2007. Sipahimalani told Sarika Malhotra that exiting an investment is a pure play of the investment thesis playing out and the best market value.
How has the rupee impacted Temasek’s portfolio?
Rupee depreciating has impacted everyone’s portfolio. However, when we are investing in emerging markets, we recognise currency fluctuations as an inherent risk. Because India has a current account deficit and depends a lot on portfolio flows, there will be phases with pressure on the currency. Nonetheless, after seeing a 25% dip in the rupee in the last 12 months, is there going be another 25% dip, the answer is no. As an investor, we have to look at such fluctuations from a longer term perspective. We take these into account in our investment decisions, and try and factor that in the return analysis.
How do you look at the valuation scenario, and compare it with China?
Valuations should be relative to the growth opportunities and the risk. In a way it is good to pay up for a company that has better prospects. It would obviously be cheap for a reason. Stocks have moved so much within this year and in spite of that India has been one of the best performing markets. In China, there are many more investment opportunities in the state-owned sector. In India, there are more opportunities in private sector.
Did you consider investing in any of the Indian state owned companies?
We have participated in some IPOs but because of propositional allocation and other norms, there is only so much as one can get. It?s not that in the IPO, as an investor. I can invest $200 million.
With retrospective amendments and policy paralysis, do you think that the investment climate in India is impacting investors?
Clearly, yes, it is. However, few fundamental growth drivers are very much in place in India, so it still remains an attractive market. Consumption has been a steady driver. If you look at any block of five years, consumption has never fallen below 10%. Regardless of what happens, that’s a theme that Temasek will bet on. So FMCG, healthcare service, financial services will be on the investment radar. We will focus on the general underlying themes that we know will be sustainable despite the ups and downs. There was talk that after the UP elections there will be reforms, and given the dynamics, one is almost not sure whether it was a good thing or a bad thing that it did not happen. Had reforms happened, the Sensex would have crossed 20,000, price expectation would have gone up too much and as a investor one would say things are too expensive to invest in. From our perspective, every market has some issue or the other. We will see volatility in the next year or two. Euro zone has a lot of uncertainty, the US has a slowdown, though we don’t estimate a double dip recession. China, is also slowing down, we don’t think that there will be a hard landing, as the government has enough fiscal levers. India is again a definite slowdown. It is something we are conscious of and that is why we are sitting at a net cash position.