India has been so good for S’pore that 50% of Singtel’s value comes from its Indian holdings

Disclaimer: Unless otherwise stated, any opinions expressed below belong solely to the author. All figures come from official and public sources.

The controversy over Air India’s performance, which weighs on its shareholder, Singapore Airlines, has dominated the media over the past few weeks. This issue has even sparked political controversy and accusations of racism, following comments posted by angry netizens on the Internet.

But as many people are questioning Temasek’s (which owns half of Singapore Airlines) investments in India, I thought it would be good to remind people just how important—and profitable—the country has been for Singapore.

Here’s a headline from a story published by CNBC three weeks ago, about the blowout performance of Temasek’s recent investments, which have just entered public trading in the stock market:

Today, nearly a month later, the three stocks have only increased their gains, with Molbio Diagnostics and Shiprocket trading at a +40% premium, while Milky Mist Dairy Foods is up by nearly +100%.

But these are just recent successes.

Last year, Temasek realised one of its largest exits in the country when it sold its 35% stake in Schneider Electric India for a whopping S$8.18 billion, after buying it for around S$860 million in 2020. That’s a nearly 10x return in just five years.

It’s easy to understand, then, when Temasek’s spokesperson told CNBC:

“India is our best-performing market on a 10-year basis.”

The country accounts for just 7% of Temasek’s S$518 billion portfolio, but it is certainly going to attract more money in the coming years, given how well it is paying off.

However, some of the longest-running—and most successful—investments started more than 25 years ago, when Temasek-owned Singtel purchased a stake in Airtel, which is now India’s second-largest telecommunications company.

Singtel is almost an Indian company

Today, Singapore’s dominant telecom is worth around S$73.5 billion, making it the fourth-largest company on the Singapore Exchange by market capitalisation.

But its high value does not come from local operations—the city-state is far too small to generate enough business for a telecommunications company of this size.

You see, Singtel also owns shares in similar companies abroad, including 26.9% in Indian Bharti Airtel, which serves 360 million customers in India, and another 160 million in Africa.

That stake is now worth S$41.7 billion on its own. It is equal to 56.6% of Singtel’s entire market cap.

This means that more than half of Singtel’s current value comes from its prudent investment in India, which started in 2000 and has cost the company a bit over S$5 billion since then.

This shows why India is so important as a destination for Singaporean capital.

There’s a limit to returns on investments made within Singapore. A country of 6 million people cannot produce multibillion-dollar enterprises that are focused on the domestic market. They have to seek opportunities abroad early or risk stagnation.

India is the largest developing economy in the world. It needs expertise, and it needs money—things that Singapore has in abundance.

Those investments aren’t always easy, and the road may be bumpy occasionally, but many of them have already paid off big for Temasek, eventually making their way into the national budget through the National Investment Returns Contribution, which is currently approaching S$30 billion per year.

• Read other articles we’ve written on Singaporean businesses here.

Featured Image Credit: Getty Images