SoftBank is looking for top-dollar valuations, consolidation and payback

Masayoshi Son, the enigmatic leader of Softbank Group which has pumped in over $7.2 billion in India, is now looking for top-dollar valuations, consolidation and payback. The Japanese investment giant is in the midst of two major deals in India which could reshape both the e-commerce and ride-hailing sectors in the country.

Even as the deal that could see US retail major Walmart investing $10-12 billion in Flipkart is steaming ahead, Softbank, which is keen on maximising its returns, is learnt to be pushing its co-investors and management of the Bengaluru-based company to also explore a deal with Amazon. 

Sources close to the deal said Softbank is still trying to convince Tiger Global, Sachin Bansal and Binny Bansal to start talks with the US technology giant. 

They added that the Japanese firm would enter its next phase of investment in India only after it achieved some level of consolidation and returns on its investments. 

According to sources close to Flipkart, Walmart was supposed to sign the term sheet for the merger almost three weeks ago, but SoftBank wants Amazon to make an offer which is touted to be much better than what the Arkansas-based company is willing to make.

“SoftBank believes that Amazon might shell out close to $14 billion for a controlling stake, which could skyrocket Flipkart’s valuation to around $22-25 billion. This would help SoftBank show its investors that it put money in one of the most valued companies in Asia,” said a founder of one of the companies where SoftBank has invested in.

Softbank declined to comment on the Flipkart deal.

SoftBank needs that top dollar valuation to undo the damage inflicted by beleaguered e-commerce player Snapdeal, in which the company had put in a little over $900 million. The investment was written off after SoftBank failed to orchestrate a merger between Snapdeal and Flipkart last year.

In an interview to a national daily on Monday, Son said while SoftBank was excited to invest in Snapdeal, it was unfortunate that it did not do well. He added that he is happy with the Flipkart investment and the progress the company has made so far. 

Amazon is yet to make a formal offer to buy a stake in Flipkart, however SoftBank is certain of a bid being made and is asking the other stakeholders to wait for it in hopes of a bigger payout. Whoever buys the controlling stake in Flipkart, SoftBank is expecting to make at least $2 billion from the deal even if it lets go half of its total stake. “This will help it get most of the money it spent on acquiring the stake in Flipkart, plus the remaining stake will ensure a seat on the board,” said a source close to the firm.

Tiger Global, which has invested around $1.5 billion in Flipkart, has guided the company through times when its valuation dipped and helped in its turnaround which finally led to SoftBank putting in $2.5 billion in Flipkart last year.

SoftBank is also trying to merge Uber and Ola in India and has been, for the last four months, trying to bring these two competitors to the table. However, post merger with Grab in Southeast Asia, where Uber had to settle for a minority stake, the US ride-hailing major is determined to not let go of the Indian market.

In a recent interview to Business Standard, Barney Harford, COO, Uber said it was always open to having conversations with potential partners around the world.

“But as we look at the India market, we are in a clear position of strength in this market and so we have been very clear that we have no interest in doing minority deals in India or any other core market. The transaction we announced in Southeast Asia with Grab is very different from India,” he said.