Temasek Invests in ICICI as Indian Banks Move to Clear Bad Loans

  • Singapore investment firm acquired 2.55 million shares
  • Also bought B/E Aero, Intellia, raised Alibaba stake

13F Filings Show Temasek, Berkshire Moves

Temasek Holdings Pte bought shares in ICICI Bank Ltd., India’s largest private-sector lender by assets, as the nation’s central bank pushes lenders to clean up bad debts that have weighed on earnings.

The Singapore state-owned investor bought 2.55 million American depositary receipts of ICICI in the second quarter, worth $18 million at the end of June, according to a Monday filing with the U.S. Securities and Exchange Commission. Temasek also acquired stakes in U.S. aircraft parts manufacturer B/E Aerospace Inc. and emerged as a shareholder in biotech firm Intellia Therapeutics Inc, which had its initial public offering in May.

Temasek added to its investments in India after outgoing Reserve Bank of India Governor Raghuram Rajan set lenders a March 2017 deadline to rid their balance sheets of bad debt, which have curbed their ability to extend loans. The proportion of Indian banks’ stressed assets, which include restructured and soured loans, to total advances surged to a 16-year high of 11.5 percent as of March 31, RBI data show.

“While ICICI is clearly not immune to the asset quality pressures afflicting the Indian banking sector at present, the bank’s robust capital buffers and cleaner balance sheet relative to its public sector peers leaves it better positioned to take advantage of a potential economic revival in India,” Nicholas Yap, a Hong Kong-based credit strategist at MUFG Securities Asia, said via e-mail.

Bad Debts

ICICI last month posted a 25 percent drop in first-quarter profit as provisions for bad debts rose. In April, the bank reserved 36 billion rupees for possible defaults by companies in sectors including cement, power and mining, an amount that came on top of the 33 billion rupees it put aside to cover soured loans in the March quarter.

Temasek had previously owned ICICI shares and had been reducing its stake in the Indian lender since 2009. It didn’t own shares before the purchase of the ADRs in the second quarter, according to Bloomberg data. ADRs in ICICI have lost 25 percent over the past 12 months, and traded at $7.33 on Monday. They were little changed in the second quarter.

Bank Holdings

Temasek has trimmed its exposure to traditional banks in favor of holdings in media, telecommunications and technology firms in more recent years, as it repositioned its portfolio to highlight long-term trends such as growing middle-income populations and transforming economies in countries such as China and India.

Banks now make up less than 40 percent of Temasek’s investments in China, down from 70 percent, though Temasek remains invested in some of the nation’s biggest lenders. At the same time, the firm has diversified into sectors such as technology, consumer and real estate, according to the latest annual report.

In India, which boasts the fastest expansion rate among the world’s major economies, Temasek’s assets include stakes in Godrej Consumer Products Ltd. and car manufacturer Mahindra & Mahindra Ltd., data compiled by Bloomberg show. Temasek’s annual review published last month also showed it had bought stakes in Glenmark Pharmaceuticals Ltd. as well as CarTrade, an online auto classifieds company.

Money managers who oversee more than $100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

B/E Aerospace, Intellia

The filing showed Temasek’s 2 percent stake in B/E Aerospace was valued at $98 million as of June and its 790,527 shares in Intellia were worth $17 million. Since its May public listing, Intellia’s shares are up 5.2 percent.

The filing also detailed Temasek’s increased stake in Alibaba Group Holding Ltd., valued at $4.3 billion at the end of June.

Temasek last month reported the first decline of its portfolio in seven years as its holdings were battered by last year’s market rout. The value of its assets decreased 9 percent to S$242 billion ($180 billion) for its fiscal year ended March 31.

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