Flipkart pay-off may energise SoftBank to chase other desi unicorns

Rashmi Pratap Mumbai | Updated on May 09, 2018

Japanese conglomerate Softbank has more than doubled its return on investments made in Flipkart, in nine months flat.

While that gives a thumbs-up to its India investment strategy, the bigger question is — what next for SoftBank in India?

For many, Flipkart was supposed to be Softbank’s main platform to build its India growth story “SoftBank was looking for a long-haul with Flipkart but, with WalMart buying it, the Japanese giant will have to look for other investment opportunities in the online retail space here,” Satish Meena, Senior Forecast Analyst at Forrester India, told BusinessLine.

SoftBank bought about a fifth of Flipkart last August for $1.5 billion. The Walmart deal now values Flipkart at $18-20 billion, which takes Softbank’s stake to $4 billion at the upper end of the spectrum. It was in around 2017 that SoftBank changed its India investment strategy after burning its fingers in early-stage start-ups. It began to focus on late-stage companies, mostly targeting unicorns. “This deal will be a confidence boost for their strategy of late-stage investment. But there don’t exist too many opportunities with the size and maturity of Flipkart where SoftBank can get in. That would be one of the repercussions,” said Jayanth Kolla, founder and partner at tech research firm Convergence Catalyst.

SoftBank’s other India investments include Paytm, Ola, OYO Rooms, PropTiger and True Balance. While both Ola and PayTm are Indian unicorns (privately held start-ups valued at over $1 billion), it will not be easy for SoftBank to shortlist more unicorns-in-the-making.

Grocery: way to go?

While SoftBank is focusing on its other India investments like Paytm Mall, as of now, it doesn’t have many options in online retail. “Paytm Mall will take some time to reach scale. SoftBank will have to wait for some time and may consider the other option of backing a grocery player,” Forrester India’s Meena added.

According to research agency Crisil, online grocery is the fastest growing segment in the e-retail space, reporting a CAGR of 65-70 per cent. It is likely to touch ₹10,000 crore in revenues by FY20.

“The deal indicates the attractiveness of India’s consumption market for global majors. With Walmart acquiring Flipkart, we expect enhanced thrust on the online grocery segment,” said Ajay Srinivasan, Director of Crisil CRISIL Research.

All eyes on Paytm

Sanchit Vir Gogia, Chief Analyst and founder of Greyhound Research, said the exit from Flipkart will give ammunition to SoftBank to focus on Paytm.

In May last year, SoftBank had invested $1.4 billion in Paytm in the largest funding round by a single investor in India. This April, Paytm Mall, the e-commerce arm of Paytm, raised ₹3,000 crore in a financing round led by SoftBank along with Chinese giant Alibaba. But there are others who think that Paytm is more of Alibaba’s play than SoftBank’s.

Published on May 09, 2018

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