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SoftBank readies for India 3.0

With a new $100-billion technology fund, SoftBank is likely to go after market leaders

Ranju Sarkar  |  New Delhi 

A man looks at the logo of SoftBank Group Corp at the company's headquarters in Tokyo

Chief Executive Officer Masayoshi Son wants to propel his group towards what he calls 2.0; in India he could be gearing for 3.0. The Japanese telecom and internet conglomerate is gearing up for a third innings in India, after failing to make a mark with its first and second set of investments in India. 

With a new $100-billion fund, is likely to go after market leaders (No. 1 or 2 players) in each market, say analysts. ‘‘This gives it the ability to buy into any market leadership deal across the world,” says managing partner of a Mumbai-based venture capital (VC) firm.

In India, it is likely to invest more in mature businesses. Its recent $1.4-billion investment in Paytm and likely investment in is illustrative, even as it tries to salvage its existing portfolio.

is in talks with Tiger Global to partially buy out its stake in and may invest more in the company once it acquires Last year, had sold to NewsCorp-backed PropTiger and decided against putting in more money in  

While Tiger Global is a (which has to return money to its investors within a stipulated period), invests from its balance-sheet and can afford to stay invested for a longer period and push for consolidation. “It can take longer positions on a fewer companies. You don’t want your investee companies to compete with each other and burn money,” says CEO of a company.

makes sense for as the combined business (with Snapdeal) could be larger, and it is getting it cheap (at a good discount to Flipkart’s existing valuation) may not pay a fair value for but gets a strong investor,” says a partner with a firm. 

Son missed investing in cab aggregator Uber, but is considering an investment of $6 billion in Didi Kuaidi, the ride-sharing service firm in China backed by Alibaba, Tencent and Baidu; it has backed GrabTaxi, the leading ride-sharing service in Southeast countries like Malyasia, Philipines, Singapore, Thailand, Vietnam and Indonesia. “It has no capital constraints or ego. If didn’t work out, it is willing to buy out Tiger Global in Flipkart, acquire 20 per cent stake and support It wants to bet on the winner or No. 2 player in each market,” says a  

Earlier this month, had written off nearly $1 billion in and $400 million in Ola—the fourth consecutive write off in four quarters. In December 2016, had written off around $475 million from its investments in the two companies. Observers say one should not read too much into these write-offs as these are part of its conservative accounting policies and a rounding-off error in its big balance sheet. also led a $250 million funding in Ola in 2016, at a valuation lower than $3 billion versus $5 billion in 2015.

When Son had invested in five-six firms in India in 2014, he was betting on them to achieve market leadership. 

He expected one of them to give a 5X return, other two 2X, while others to just return him the capital. ‘‘The return expectations are not the same for a $40 million deal and a $1 billion deal. If they can earn $2 billion on a $1 billion investment, it will be a big thing,” says a

First innings

first entered India in 1999 when it set up a firm called Eventures India with NewsCorp-backed media ePartners and Ispat Industries promoter P K Mittal. It invested $43 million in 14 companies, exited three, wrote off six and sold four companies to Nexus Venture before folding up during the  2000-01 dot-com bust.  Around the same time, a new called Asia Infrastructure entered India. It was a JV with networking company Cisco Systems. It had invested in Sify Technologies and IL&FS Investsmart before it morphing into SAIF Partners in 2004, and had become independent of

did not make any new investments till 2011, when it had invested $200 million in mobile advertising firm InMobi. While it was the first to join the $100-million valuation club, it reported losses for several years and faces stiff competition from Facebook and Google. It also has a JV called Bharti Holdings with Bharti Enterprises, through which it holds a stake in messaging app Hike (last valued at $1.4 billion).

Second innings

SoftBank’s second innings in India began in late 2014, shortly after Nikesh Arora was brought on board. Arora, who was to succeed Son as CEO, left abruptly in June 2016 after an internal probe cleared him on some concerns raised by investors. Under Arora, invested $ 2billion in India in a span of a year (see table). 

In a quick succession, had invested $627 million in e-commerce marketplace and led a $210 million round in cab-hailing service provider Ola. By mid-2016, its portfolio had expanded to six companies, including realty portal Housing, budget hotel aggregator OYO Rooms and on-demand grocery delivery service  

‘‘While they had picked the right spaces and invested in good teams, they didn’t get the timing right. They paid too much money at the top of valuation,” says managing partner of a venture capital  firm. Alibaba, with a 80 per cent share in the $1-trillion Chinese e-commerce market, is valued at $150 billion while the Indian e-commerce market is $15 billion today.

First Published: Thu, May 25 2017. 01:04 IST