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SoftBank’s proposed investment in Uber could improve the overall cab-hailing ecosystem in India as the Japanese investor also owns stake in rival player Ola. Though market analysts rule out any merger between Uber’s India operations and Ola, they said SoftBank may be spreading its bets across various players in the same segment. SoftBank has also invested in Uber’s South-East Asian rival Grab and Chinese cab aggregator Didi Chuxing.
Backing leadersRehan Yar Khan, founder, Orios Venture Partners, an early investor in Bengaluru-based Ola, said: “SoftBank seems to have a strategy of investing in the leaders in every market. They have done this in e-commerce, and now are doing it in the taxi business. I think SoftBank is a highly professional organisation and will focus on creating an overall ecosystem value.”
Pankaj Makkar, Managing Director at Bertelsmann India, a part of German investment and diversified group Bertelsmann, said there is nothing wrong in an investor firm backing two or more companies in the same segment as long as there is no information-sharing between the companies or one company gets the leverage to influence the investor to get a competitive edge.
Other global hedge funds have also invested in rival companies as a strategy to gain access to the global as well as the local market. Tiger Global, for example, has invested in Amazon globally and in India’s e-commerce giant Flipkart. Alibaba has invested both in Snapdeal and Paytm in India.
“It acts like a cushion because if one fails, then there is the other to help it recover the losses,” said a market expert.
Harish HV, Partner, Grant Thornton said a fresh investment from SoftBank will give Uber the much needed boost in markets such as the UK, where it is battling licensing issues, and in India where it is fighting a tough battle against Ola. He, however, ruled out any immediate merger between Ola and Uber, as the deal could then come under the scanner of the Competition Commission of India.
He also added that while there is nothing wrong in investing in competing companies, many VCs prefer to stay away from that strategy as, at the end of the day, money from the same kitty will be going into rival companies.
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