MUMBAI: Call it a study in contrast. At a time when Singapore's sovereign investorTemasek Holdings is coming under increasing pressure to have a relook at its large Chinese banking sector exposure on account of slow growth, in India it is aggressively pursuing investments in banks and non-banking financial institutions (NBFIs).
In the last one year, out of the four investments Temasek has made in India, two are in financial services.
They include Axis BankBSE 0.11 % and Shriram Commercial Vehicle Finance. Interestingly, in 2012, the sovereign's investment arm part exited its investment inICICI BankBSE 0.61 % by selling Rs 1,500 crore worth of shares in the country's largest private sector lender.
"We look at financial services as a proxy for underlying economic growth as it reflects the overall consumption story," said Promeet Ghosh, Temasek's India Managing Director.
Financial services continues to be Temasek's largest portfolio exposure by sector, at 31%.
For Temasek, the focus continues to be on negotiated deals while retaining the flexibility to make public market trades. It was among the anchor investors for the Just Dial IPO.
Most private equity watchers feel the recent investments of the firm clearly complement its investment thesis of backing healthcare, consumer brands or infrastructure enablers. Earlier in March this year, it pumped in 140 crore in Bangalore-headquartered cancer care provider HealthCare Global Enterprises (HCG).
In December 2012, it had also agreed to buy 19.99% stake in Godrej Agrovet for Rs 572 crore in what was be the largest investment in agriculture-related businesses in India in recent times.
Agrovet, a diversified agri-business company, has interests in animal feed, oil palm plantations, agri-inputs and poultry. This was Temasek's second investment in the Godrej Group as it had also picked up a 4.9% stake in flagship Godrej Consumer Products, the maker of Cinthol soaps and Good Knight mosquito repellents.
Ghosh, a former Merrill Lynch banker known for his marquee cement sector mergers and acquisitions, sees PE potential in the sector as well as many large global players are keen to expand their local operations but on the strength of their local balance sheets. Ghosh will not talk specifics, but Temasek, was recently in the race to pick up a minority stake in Lafarge's India operations.
But is India at 4% of the total portfolio still relevant and attractive investment destination? Despite a falling rupee and a paralytic policy environment, Temasek's top brass sees enough silver linings.
The demographic dividend, a young workforce, abundant managerial and entrepreneurial pool that has been fuelling an annual nominal consumption growth at 10-15% in any five-year period for the last 30 years, still makes for a compelling investment case.
"We are long term investors and unlike most traditional PE funds we invest from our own balance sheet and have a permanent pool of capital. So we don't have pressures on exit or deploy capital. Infact, volatility of one to three years or short-term currency fluctuations do not disrupt us, It actually gives us more opportunities," adds Ghosh.