April 6 (Bloomberg) -- Temasek Holdings Pte Ltd., the Singapore state investment company, is seeking stakes in Indian power producers including GMR Group as they double capacity to meet demand in the world’s second-fastest growing major economy.
“We are in advanced discussions with GMR,” Wong Kim Yin, managing director for energy investments at Temasek, told reporters at a power conference in Singapore today. “We are trying to get exposure to the domestic India markets.”
Temasek, manager of about S$172 billion ($123 billion) of assets, is betting utilities will ramp up generation in the next seven years to overcome power shortages that India’s government says are constraining economic growth. The 17-member Bombay Stock Exchange Power Index has climbed 62 percent in a year, lagging behind the 70 percent gain in the main Sensitive Index.
“Temasek is probably entering at the right time as the sector and the company have a lot to offer in the short term,” said Abhineet Anand, a Mumbai-based analyst with Antique Stock Broking Ltd. He recommends investors buy shares of GMR Infrastructure Ltd., a unit of GMR Group, with a one-year price target of 82 rupees.
GMR Infrastructure fell 0.2 percent to 63 rupees at 1:22 p.m. in Mumbai trading compared with a 0.1 percent gain in the Sensitive Index. The stock has climbed 24 percent in a year.
A. Subba Rao, chief financial officer of GMR Group, denied on Dec. 15 an Economic Times report that the group was in talks with Temasek and ICICI Bank Ltd. to raise funds to build power plants. He couldn’t be immediately reached at his office today for comment.
Sources of Funding
“Typically we look more at investing in power companies than in power projects,” Wong said, in reply to a question on whether Temasek was investing in new generators in India.
Temasek, which has invested in resources companies and financial institutions including ICICI, India’s second-biggest lender, is in talks with “a number of players,” Wong said.
Finance Minister Pranab Mukherjee said last month that inadequate supply of coal, gas and power is “worrying” as it constrains economic growth. Prime Minister Manmohan Singh called for a partnership between the government and companies to increase power generation.
“In places like India and China, sources of funding remain domestic,” Temasek’s Wong said at the conference. “It is unclear if funding will continue without government stimulus.”
Equity markets offer sources of funding and Singapore is relatively untapped by the power industry, he said.
Indian utilities plan to increase generation capacity to 313,572 megawatts by March 2017 from 156,092 megawatts as of Dec. 31 to curb peak-hour shortages. One megawatt is enough to power about 200 middle-class Indian homes.
Growth in the $1.2 trillion economy may accelerate to as much as 8.75 percent in the year ending March 2011 from an estimated 7.2 percent in the previous financial year, Mukherjee said on April 2.
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