Ven Capital, one of the largest private equity (PE) firms in Japan, is looking to invest more in India. The PE arm of Japanese financial house SBI Holdings, which has invested in nine companies in India, might announce its 10th investment in India soon, a top executive said.
The PE major would invest in the financial technology (fintech) space in India, Masaki Takayanagi, managing director, SBI Ven Capital, said during a recent visit to India. SBI Holdings owns the largest internet-based brokerage firm in Japan, SBI Securities, and an internet-based commercial bank, SBI Sumishin Net Bank.
The SBI Group recently launched a fund focused on the fintech space. The fund will invest in eight emerging markets, including India. The SBI Group is looking to invest in the fintech space and online brokerages in India both at a group/strategic level and as a PE firm.
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"When emerging economies grow, the finance sector grows faster," said Takayanagi. He noted that when the Japanese economy was growing at 10 per cent in 1960s and 1970s, the finance sector was growing faster than that.
According to him, the same thing is happening in India. "The Indian economy is growing at five to six per cent, but the finance sector is growing three times as much. When an economy is growing, it needs capital. I expect the finance sector in India to grow faster than the economy."
SBI Ven Capital has invested in nine companies in India in areas such as e-learning, job portal, online gaming, payments for banks, mobile search platform, healthcare IT services, e-commerce, real estate platform, and pharmaceuticals but Takayanagi is willing to disclose only three of these.
These include e-learning platform Liqvid, which helps people to speak English, e-commerce price comparison site Zopper, which recently raised series-B funding of
$5 million led by Tiger Global, and property platform Housing.com that relies on surveyors to verify listed properties.
Globally, the PE major does both early-stage deals and growth capital, including pre-IPO and private investment in PE (PIPE) deals, but in India it is trying to invest early. "You have to take a longer-term horizon in India, and patiently support and nurture your investments," said Takayanagi.
SBI Ven Capital is the overseas PE arm of SBI Holdings (Japan) with assets under management in excess of $3 billion. The SBI Group has invested in about 800 companies globally.
Asked if valuations in e-commerce are stretched, Takayanagi said this issue was not limited to India but also in other markets such as Indonesia. According to him, there are two schools of thought on this. One school believes you make an investment of any amount, say $10 million or $20 million, and hopefully it will be billions in five years. The other school thinks paying $20 million is not right, as the company at this point of time should be valued only at $10 million.
"We support the latter view. We don't want to blindly invest in something hoping it will be 100 times in five years. Our policy is to find good investment and enter at attractive price," said Takayanagi, and further expressed the concern on the current trend among e-commerce firms.
"Some companies in the social space are focusing too much on building the customer base at the expense of monetisation. The owners feel they can give stuff free and build customer base, and expect somebody to buy them. While there may be some truth in this approach, monetisation is also important. Japanese social e-commerce businesses are good at this, and we can contribute and collaborate with Indian firms on monetisation," said Takayanagi.
Japan's SBI Holdings has three other partnerships in India. In January 2012, it set up a $100-million PIPE fund with Edelweiss Financial Services to invest in small and mid-cap firms and the Japanese firm committed $75 million for this fund. In February 2012, SBI Holdings set up a $50-million joint investment fund with Satyam to invest in high-growth companies in the information and communications technology space. It also committed $15 million in a $75-million fund raised by Nirvana Advisors in January 2012