Temasek India head Ravi Lambah who is based in Singapore, recently gave an interview to Indian media Business Today, which was published 2 weeks ago (‘Growth not a concern; India fits well in our long-term plan: Temasek India head‘, 27 Oct).
Lambah said that India fits well in the “long-term structural trends of sustainable living, longer life spans, rising consumer spending power, higher connectivity, smarter system, a sharing economy and a more connected world”.
“If I think about India in the next five to ten years, these trends will shape how we pick our bets. Currently, India fits really well in those trends,” he added.
In particular, Lambah is rather bullish about Indian banks. “We continue to invest in Indian banks because banks truly represent a great proxy for the economic growth,” he said. Temasek has investment in a small finance bank AU Small Finance Bank. It has also invested in a full-scale Bandhan Bank.
Incidentally, Lambah is also the joint head for telecom, media and technology in Temasek. He is a chartered accountant and holds a Bachelor’s degree in Commerce and Economics, from India’s University of Bombay.
Risk in investing in India
Investing in India is not without risk.
Last November, for example, Singtel posted its first quarterly loss of S$668 million in its 2Q result ending 30 Sep 2019. This was primarily due to a provision made for huge losses incurred by Bharti Airtel, an Indian telco which Singtel invested in (‘Singtel suffers 1st quarterly loss with Bharti Airtel investment through CECA‘).
GIC, the other Singapore’s sovereign wealth fund has also invested in Airtel. Airtel was impacted by an adverse Indian court ruling against the telecom industry in India last year. It resulted in Airtel recording an exceptional quarterly provision of approximately S$5.49 billion of losses, which also impacted Singtel.
Last March, GIC invested some S$972 million into India’s troubled Airtel. GIC’s investment through Airtel’s rights issues and bonds was to help the Indian telco reduce its massive net debt estimated to be Rs 1.06 lakh crore (S$21 billion) at end of 2018. Singtel also joined in to invest some 37.5 billion rupees (S$730 million) to help Airtel cut its huge debt. Last year, for the first time in past 15 years, Airtel generated negative cash flows.
Due to the massive debt, Airtel’s credit rating was downgraded for by Moody’s to below investment grade status last Feb. “The downgrade reflects uncertainty as to whether or not the company’s profitability, cash flow situation and debt levels can improve sustainably and materially, given the competitive dynamics in the Indian telecom market,” Moody’s said at the time.
Plenty of capital to invest in India
Nevertheless, Lambah said that Temasek would be “cautious”, but added that Temasek is looking forward to “deploying more capital in India” and is “positive on India”.
“We have plenty of capital to deploy when it comes to the right opportunities,” he said.
With regard to Temasek’s investment portfolio, Lambah also said that their portfolio is “very resilient” and “don’t have much stress in it”.
“While the growth may go up and down year-to-year and we might end up seeing 4 per cent or 5 per cent growth or negative 24 per cent growth which we saw in the last quarter, but being a long-term investor, we don’t get so perturbed by these short-term volatilities in these metrics,” said Lambah.
Singapore able to invest in India thanks to CECA negotiated by Heng and team
Thanks to the India-Singapore Comprehensive Economic Cooperation Agreement (CECA), Singapore entities like Temasek, GIC and Singtel are now able to invest in India with less restrictions.
Under CECA, it also enables Singapore and India to trade goods freely, and allows professionals to work in each other country more easily.
Deputy Prime Minister Heng Swee Keat who was then Permanent Secretary for Trade and Industry led the Singapore side to conclude CECA with India after 13 rounds of talks. Heng and his team essentially did the ground work together with their Indian counterparts before presenting their proposals to the politicians for approval. CECA was finally signed off in 2005 during Prime Minister Lee Hsien Loong’s state visit to India.
Areas covered by CECA include: Improved Avoidance of Double Taxation Agreement, Trade in Goods, Customs, Investment, Trade in Services, Intellectual Property, etc.
However, controversial ones like concluding further Mutual Recognition Agreements (MRAs) so as to facilitate the freer movement of professionals between Singapore and India are also inside CECA. It helps to recognise each other’s education and professional qualifications so that Indian and Singaporean professionals could be able to practise in each other country.
Then there are clauses which permit “intra-company transferees” to easily work in each other country. An employee needs only be recruited by a company for as little as 6 months to be considered for transfer from one country to another to work.