By 27 October, 2009

The two sovereign wealth funds of Singapore government, Temasek and GIC, have together sold shares worth over Rs 2,100 crore or $460 million in India’s largest private bank ICICI Bank between April and September, as per VCCircle estimates. As a result, their combined holding has come down to 7.29% as compared to 9.9% as of March 31, 2009.

GIC sold a chunk of its stake between March 31 and June 30 this year, pocketing over Rs 400 crore and sold some more worth over Rs 120 crore between June and September. Temasek, on the other hand, sold a large chunk pocketing around Rs 1,600 crore in the last three months, as per average share price of ICICI Bank in the period.

The stake sale is important for two reasons.

First, it will be seen as a pullback after much lobbying with the government and India’s central bank RBI for a bigger exposure in ICICI Bank. There are ceilings on private business groups and foreign investment firms in picking equity in Indian listed banks.

Second, the partial exit from the investment can be seen in the light of sharp 20% drop in Temasek’s global financial assets for the year ended March’09 due to few poor equity calls and global markets crash which shrunk asset values. The fund house had suffered losses of an estimated $4 billion when it exited investments in Merrill Lynch and Barclays last year.

India’s Manish Kejriwal (who heads the India office of Temasek) was one of the key members of the team that decided to invest in Merrill Lynch.

OTHER EXITS IN INDIA

One of the biggest global sovereign funds in terms of its investments in India, Temasek Holdings has recently also exited its investment in multiplex chain Fame India. It sold 13.5% stake in Fame for a little over Rs 14 crore in open market sales. Temasek had bought around 10% stake from PE firm India Value Fund in a secondary deal in 2005. Temasek has also sold stake in container-freight stations’ operator Gateway Distriparks to a subsidiary of Allcargo Global Logistics.

STRATEGY

The partial exit from ICICI Bank comes as a surprise since the fund house was looking at Asia and Latin America as investment destinations and has stated that it is comfortable with financial services as its core portfolio holding.

Over the last few years Temasek had expanded outside Singapore and increased financial assets to 40% with equity stakes in Merrill Lynch, Barclays and Standard Chartered. In India, it holds stake in largest mobile operator Bharti Airtel besides Tata Sky, Bharti Infratel and Tata Teleservices among other firms. Temasek is the biggest shareholder in five of Singapore’s 10 biggest publicly traded companies by market cap including SingTel and DBS.

Last week Dow Jones reported, that Temasek said it wants to invest more than $1.8 billion in the next few months, with a focus on China, India, Mexico and Brazil. The investment plans are in line with recovery in its portfolio after the sharp decline last fiscal.

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