SoftBank’s India investment hits $8-billion mark

SoftBank’s strategy, to back Unicorns, has yielded positive results in the short-term in India   -  REUTERS

In December 2014, Masayoshi Son, founder of Japanese internet giant SoftBank Group said that his group would invest $10 billion in the Indian market by 2024. However, within five years, since Son made that remark, SoftBank has already achieved the $8-billion mark and is likely to surpass the committed amount much before the targeted year.

According to a data by start-up research and data analytics firm Tracxn, SoftBank Group, including the SoftBank Vision Fund, has invested more than $8 billion in the Indian e-commerce and internet market in the last five years thus making it the biggest investor in the ecosystem so far followed by American private equity fund Tiger Global LLC and South African Naspers at $3.63 billion and $2.9 billion, respectively.

While Tiger and Naspers along with others like mid- and later-stage funding in the market leaders across segments such as Flipkart and Ola, SoftBank chose the second and third major players and the move was seen as ambitious by many experts then.

However, cut to 2018, while Tiger Global and Naspers have slowed down their investments in the Indian market, SoftBank is on a war footing. It has funded almost all the big players in the country including a $2.5-billion round in Flipkart last year and was touted as the largest investment by a single investor in any online company in the Indian market so far. It also led a $1.5-billion in Alibaba-backed Paytm, the largest player in the fintech/payments space at present.

According to several experts tracking SoftBank’s India investments, the Japanese firm has changed its investment strategy from what it was about five years ago.

Harish HV, an independent e-commerce expert and former partner with Grant Thornton, said, “SoftBank’s early investments have not paid off. Many of its investments, which were early stage, were to be written off by the Group. It has then reworked on the strategy and started focussing on matured start-ups/companies instead of the emerging ones.”

Some of the SoftBank’s early-stage investments were in companies such as Snapdeal, InMobi, and Oyo. While InMobi has not given SoftBank any significant returns, the investor had to write off its investments in Snapdeal and, which was later sold to PropTiger for about $70 million, where as SoftBank had invested close to a $100 million in the company.

Manoj Patkar, Executive Director & Partner, 7i Advisors LLP, said, “SoftBank’s strategy, to back Unicorns, has yielded positive results in the short-term in India. SoftBank dominated the Indian market in 2017 having invested in four out of the top 5 most-funded technology companies – each of which is a market leader in their respective market categories.”

However, Patkar, added that the current strategy may not benefit the company from a long-term perspective as investing in only unicorns comes with its own perils of over-priced valuations, slowing market growth and market competition among others. Besides, the Indian market has not witnessed emergence of any unicorns lately.

“SoftBank should have a healthy mix of focussed identification and investment in ‘early-stage companies’ that can be future market disruptors in their respective segments. This can provide them an edge of having invested in not just current market leaders but also future market leaders based on the Indian context.”

He added that the increased investments from SoftBank is positive development for Indo-Japanese investment corridor.

“It can potentially also encourage further investments from other Japanese investors especially in the Indian technology market. This is in line with focus on improved bilateral ties and increasing cross-border transactions in the Indo-Japanese corridor which are currently being encouraged by the respective governments,” Patkar added.

Published on April 12, 2018

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