Khazanah’s Oyo bet points to greater focus on overseas deals, say investors

Photo credit: Oyo

Khazanah Nasional, the Malaysian sovereign wealth fund, is reportedly in discussions to lead a US$400 million funding round in India’s Oyo Hotels & Homes. Bloomberg reported that SoftBank-backed Oyo is seeking to raise funds for expansion and cutting debt.

But Malaysia-based investors and founders who spoke to Tech in Asia are puzzled over the news. They cite how Prime Minister Anwar Ibrahim has mandated government-linked investment companies (GLICs) like Khazanah to concentrate investments in local firms, including tech startups. GLIC is an official term referencing Malaysia’s largest state-owned financial institutions.

But some officials working at these GLICs tell us that while the news seemed to run in contradiction to the national mandate, it was unsurprising. It is increasingly difficult to find quality deals in Malaysia simply because there aren’t that many early-stage startups being produced in the country, they say. They’re looking at overseas investments to meet their mandates in providing dividends to their members.

One of these GLICs is the Retirement Fund, the civil servants’ pensions fund that has backed Indonesian aquatech giant eFishery.

Screengrab from Khazanah Nasional’s 2022 annual report / Photo credit: Khazanah Nasional

In Khazanah’s case, according to its 2022 report, the fund has been reducing exposure to Malaysia, while increasing investments in Asia, the US, and the Middle East. The sovereign wealth fund isn’t the only one. The Employees Provident Fund (EPF), the country’s private pensions fund, has also been increasing overseas investments, citing better returns abroad.

Making losses selling lingerie

Despite the chase for better returns, there are concerns that Khazanah’s investments abroad may not pan out. At the time of writing, Khazanah has already increased its exposure in India with investments in logistics provider Xpressbees and fast-food chain Wow Momo Foods.

But there was also an investment made in 2015 that brought ridicule to the fund. Khazanah’s investment in Indian lingerie maker Zivame led the fund to incur losses of US$20 million in 2018, according to then Economics Affairs Minister Mohamed Azmin Ali.

It was the Malaysian fund’s first ecommerce bet in India. And it was also the smallest investment to be written off in 2018.

Former Khazanah managing director Azman Mokhtar, who oversaw the investment, came out defending the bet, saying the fundamentals of the fund’s investments should be properly scrutinized. In the case of Zivame, India is home to a billion people, half of whom are women with rising income levels, Azman said.

He then claimed that Zivame remained a going concern, that it had its best-ever quarter, and that the fund remained “quietly confident” that the company would be able to recover “all or almost all of what we have provided for.”

A failed bet, albeit a small one, was an investment in Kuala Lumpur-based ecommerce platform FashionValet.