MANISH KEJRIWAL Managing Director, Temasek Holdings Advisors India

In May this year, a deal took place in Hyderabad that made the small but secretive private equity industry in India sit up and take note. A relatively little-known pharmaceutical company, called Matrix Laboratories, sold just over 15 per cent of its equity to two investors at Rs 1,500 a share-over 13 times its earnings multiple, compared to the pharma industry average price-to-earning of 6 or 7. Matrix's haul: Rs 337 crore, making it the biggest deal of 2003-04. Who were the investors? Newbridge Capital, a US-based fund with $1.7 billion in assets and Temasek Holdings.

It wasn't so much Newbridge as Temasek that caught the industry's attention. As a wholly-owned company of the Singapore government's Ministry of Finance, Temasek-it means Sea Town and is the historical name of Singapore-is unlike any other investor. It doesn't raise funds like other private equity firms, but has a ready war chest of $75 billion to dip into. It doesn't have to publish its financials (although that's soon going to change because of a proposed financial restructuring) and, therefore, runs a highly secretive and low-key operation. Last but not the least, steering Temasek is a member of Singapore's First Family-Ho Ching, wife of the new Prime Minister, Lee Hsien Loong.

More ominously for its rival investors in India, Temasek has landed on the sub-continent with a purpose. Back home in Singapore, Temasek already has investment in over 40 large corporations such as Singapore Airlines, SingTel, DBS Bank and Keppel Corporation, so the scope for growth is limited. And since Temasek is loaded with cash, it has decided to go shopping for companies in other parts of Asia, starting with India, where it set up an office (its first outside Singapore) in March this year, and China, where one will be set up later this year. So when Temasek shows up in your (developing) country, it's a bit like waking up one day to find a super tanker sitting right in the middle of your swimming pool. Says the head of a rival private equity firm in India: "What they are essentially doing is managing the foreign exchange reserves of the Singapore government, but with a lot more focus on Asian countries this time."

Small wonder, then, Temasek's deals in India have been king-sized. Last December, it picked up a stake in ICICI Bank and increased it to 9 per cent for $400 million. More recently, it signed a deal with Apollo Hospitals to buy a 5 per cent share in the hospital chain for around $10 million. Throw the Matrix deal in, and you are talking over $450 million in investment, making it the second largest private equity investor behind Warburg Pincus. But if you count the investment Temasek has made indirectly-like through another private equity firm in India, Actis, or through its subsidiary like SingTel in Bharti Tele-Ventures-it is by far the single-biggest investor in the business.

Yet, talk to Manish Kejriwal, the 36-year-old India Managing Director roped in from McKinsey, and he'll profess a near-ascetic interest in rankings. "We definitely do not aspire to get onto any league tables for cumulative size of our investments," he says. "There is no machismo or ego, and whether or not we are the largest guy around town doesn't make any difference to us whatsoever."

HO CHING: THE INSIDER

The Helmswoman: It is Ho's job to make Temasek more global The 49-year-old Ho Ching, wife of the new Singapore PM Lee Hsien Loong and daughter-in-law of Singapore's founding pm and now Senior Minister Lee Kuan Yew, took over as Temasek Holdings' ED & CEO two years ago. The Stanford-educated Ho has had a long stint in the state-sector, leading Singapore Technologies, ST, (100 per cent owned by Temasek) for five years before taking over as Temasek's new boss. In a way, the legacy of cozy, and often incestuous relationship between Temasek and the Singapore government (Temasek is 100 per cent owned by Singapore's Ministry of Finance), that Ho inherited is her biggest challenge. She has to wean away the 40-odd companies under Temasek from government protection to become more independent, profitable and hopefully more global as a consequence, and yet not be seen as rocking the boat. Known to be a methodical decision-maker, she has, for the first time this year, in Temasek's 30-years of existence, offered to make the company's accounts public, to get a debt rating towards a global debt swap later this year to lower the company's cost of funds. And she has proved herself as a tough, no nonsense leader in the past. As ST's boss, she allowed the collapse of an affiliate, disk-drive maker Micropolis. But whether being an insider will help her leverage her clout to prevail over the often overbearing government or merely bound her into tradition remains to be seen.

Bullish on India

Temasek's India strategy is straightforward. It invests in sectors that are proxy to India's growth like telecommunications, banking and transportation (read: ports and airlines). Or alternatively, in areas such as IT/BPO, automotives, auto components, healthcare and pharmaceuticals where the country has a competitive advantage. In other words, India is probably one of the few markets that can help Temasek keep up, or better, its track record of 18 per cent compounded annual return over the last three decades. Accordingly, it has lost no time in zeroing in on some great deals. Besides the ones sewn up recently, Kejriwal has signed two more deals (he won't say which ones) and there could be seven companies on the radar (see Quick On The Draw). Besides, there are reports of Temasek planning to set up an equally-owned $200-million power sector fund with Reliance Power.

Given that Temasek is not a fund and hence under no pressure to monetise or exit its investments, it operates almost like a foreign direct investor, with a time frame of eight to 10 years, and sometimes longer. Other funds, in contrast, have a six-to-seven year window. "This makes us quite unique in the private equity space and we can support our portfolio companies over a much longer period of time," says Kejriwal.

That can be a big draw for companies that are at an early stage of growth or those that are independent minded. Often, when a private equity investor wants to exit, he'll either push for an IPO or scout for a strategic buyer of his stake, sometimes to the distress of the management. So, theoretically, Temasek's long staying power should enable it to pick up equity at a discount compared to its rivals.

Just the same, Temasek also gets to partake in the more short-term investment-led fund business through various funds where it has an exposure-like Merlion, for instance. From Temasek's perspective, the point of doing funds is very simple. "We will deploy money indirectly through other funds if they cover investments themes or areas that we don't focus on ourselves. This could either be smaller sized deals, say below $20-million of equity, or distressed assets where we would rather invest indirectly through a fund," explains Kejriwal.

So WestBridge is a technology-specific fund, Merlion focuses on late stage established businesses, and the one reportedly in offing with Reliance Power will focus on just the power sector. "And we can always look at larger deals by combining Merlion with either Standard Chartered or Temasek," says Karam Butalia, Managing Director of the $100-million Merlion India Fund and Global Head of Private Equity at Standard Chartered Bank.

Such is the company's focus on its investment credo that it doesn't even shy away from investing in competing companies. "We clearly let the management of any potential investee company know right up-front about our investment philosophy, that we do at times invest in two or more companies in the same sector," says Kejriwal.

Is a conflict among the TLCs (Temasek-linked companies) in India a possibility? It is, although not immediately. For example, SingTel, which has investment in Bharti Tele-Ventures, and STT may soon be competing in the sub-continent if the latter's bid for Idea Cellular goes through. Even Temasek will be head-on with its TLCs should its much talked about deal with Reliance Infocomm materialise. Of course, don't forget that Temasek is already looking at Air Deccan and Jet Airways, both of which are competitors.

Such conflicting investments happen largely because the TLCs and funds have their own investment philosophies, besides management teams and structures in India and Singapore. Kejriwal only looks after the parent Temasek's direct and portfolio investments in the country. All investment decisions are made by an investment committee, comprising all MDs but chaired by Ho, which meets every month in Singapore. Any senior member can make an investment proposal, but the decision to invest or not is made collectively.

What some investee companies also like about Temasek is that it is happy letting incumbent management run the show. For instance, although it has a 9 per cent stake in ICICI Bank, it hasn't asked for a board seat simply because it feels the bank has "an outstanding board and a very professional, strong and deep management team". And where it does put its nominee on the board, like in the case of Matrix where Temasek Holdings' Managing Director S. Ishwaran has a seat, managements find it a help rather than an encumbrance. "It is not an inactive alliance," says N. Prasad, MD, Matrix. "Within the global pharmaceutical industry they have very good networking and this will directly or indirectly help us grow business," he says.

No doubt, that's an additional promise Temasek will hold out to companies in India as it seeks to build it investment empire outside the city-state of Singapore.