Temasek turns cautious as global growth concerns weigh

Singapore state investment firm Temasek Holdings reported a record high portfolio value on Tuesday but said it is likely to slow its pace of investment over the next year and a half.

“Given the market outlook, we may recalibrate or slow our investment pace over the next nine to 18 months,” Alpin Mehta, managing director of investment at Temasek International, said in the firm’s annual review.

The firm, one of the most active private equity-style investors in India, said it was generally positive in its outlook for the year ahead but expects global growth to moderate.

Sulian Tay, also a managing director of investment, said there is a probability of “increased downside risks” in the near term. “Our balance sheet and portfolio resilience give us the flexibility to ride out the short-term market volatility, while delivering sustainable returns over the long term.”

The firm said in its annual review that its net portfolio value rose to a record high of S$308 billion at the end of March 2018 from S$275 billion a year earlier.

Lee Theng Kyat, executive director and chairman at Temasek International, said the firm’s net portfolio value crossed S$300 billion for the first time. “It is now almost three times the dotcom peak of just over S$100 million.”

Temasek’s one-year shareholder return was 12%. That’s substantially higher than its 10-year return of 5% and its 20-year return of 7%. The firm’s dividend income for 2017-18 rose to S$9 billion from S$7 billion the year before.

The firm was a net buyer in 2017-18 as it invested S$29 billion and divested investments worth S$16 billion. In comparison, it was a net seller in 2016-17.

Temasek made significant investments in 2017-18 in early-stage companies across agribusiness, healthcare and digital media sectors. “These early-stage investments, including indirect investments via venture capital funds, now constitute just under 3% of our portfolio,” the firm said.

The firm is seeking opportunities in sectors that are driven by transformational technologies, demographic shifts and changing consumption patterns, Mehta said.

Investment focus

Temasek made a large part of its investments in 2017-18 in the US, followed by China and Europe, it said.

On Tuesday, Temasek disclosed investments only till March 2018. In India, till then it had announced only its investment along with Schneider Electric to acquire Larsen & Toubro’s electric and automation business unit in a $2.1 billion deal.

Since then, the firm has committed a lot more, as VCCircle reported in June.

It invested in IT firm UST Global and is paying $147 million to acquire a 4.5% stake in AU Small Finance Bank Ltd.

Temasek is also investing with digital payments firm PayPal to bet $125 million on a payments company and said it was joining hands with others to pump in $300 million in the Indian logistics sector through a platform. The firm has also invested in a TPG-backed Asian healthcare platform.

Since 2011, Temasek has focussed on investing in technology, life sciences, agri-business, non-bank financial services and consumer sectors. These sectors have an underlying theme of being technology enablers, the firm said.

“Our interest in the non-banking finance sub-sectors has been in payments and other tech-enabled services. Other areas of investment activity included innovative businesses in life sciences and agribusiness,” the firm said.