Temasek Tracking - Nat'l Stock Exchange India Ltd, making peanut returns

1992   Company incorporated
2010   Temasek invested
2016   IPO did not materialise
2019   IPO also has not happened

There are 2 national stock exchanges in India - Bombay Stock Exchange and National Stock Exchange of India. The capitalisation is roughly the same for both. BSE has more companies listed but NSE has the bigger volume.

In May 2010 Temasek bought into NSE via a private sale by NY Stock Exchange which had to divest due to conflict of interest. Temasek paid Rs 669 crore (US$150m) for 24,750,000 shares (4.95%). This puts the valuation of NSE at US$3b.

A planned IPO for 2016 was aborted after the Securities Exchange Board of India initiated a probe against NSE alleging misuse of its co-location facilities. Several investors. including Temasek, had planned to exit after the IPO. After the failed IPO, NSE put the idea on the back burner and several investors were not too happy with the board's lack of motivation to go public which prevents their exit. In 2019 NSE announced possible IPO in the second half of the year. It has not yet come to pass.

What is the current value of Temasek's investment? In Mar 2018, IFCI Ltd made a private sale of 0.22% stake at Rs 873.74 a piece. This puts the NSE valuation at US$6.5b. In August 2018, State Bank of India sold its 3.9% stake for about Rs 1,700 crore. This puts NSE valuation at about US$5.7b. There seems to be a 100% increase in valuation.

A 100% increase in valuation looks impressive off the cuff. However, foreign investors in India have to grapple with two issues, in addition to the various other risks. One is the depreciation of the Indian rupees and two, is the 20% long term capital gains tax which was re-introduced in 2018.

So how does Temasek's investment in NSE looks like?

Date	Rs Crore	Rate	S$	Date	Rate	S$	.
May 2010	669	32.47	206,036,341	Sep 2020	53.75	124,465,116	FX loss S$81,571,225
Sep 2020	1,338			Sep 2020	53.75	248,930,223	Assume 100% growth
						124,465,116	Unrealised gains
						24,893,023	Cap gains tax
						99,572,093	Net book gains

(Ignore dividends which are insignificant)

The Indian Rupee has depreciated against S$ by 65% from 2010 to 2020. The accounts should have booked a S$81m foreign exchange loss to date.

After capital gains tax of 20% the net unrealised gains is S$99m. It looks like a 32% gains over original investment of S$206m. Looks impressive at first sight. So if Temasek can divest now with this hefty gains, how much bonus should the executive team be getting? The reality is the S$99m gains over 10 years actually work out to ROI of 0.1875% p.a. which is below Temasek's cost of funds.

Check out Portfolio Compilation

View an attempt to list Temasek portfolio with links to microblogs of troubled assets such as these. It's a work-in-progress that gets updated as and when they are published. If you wish to be updated on new microblogs, simply submit your email in the box on the top, right. Thank you.