Draft e-commerce policy unites SoftBank, Sequoia Capital, Tiger Global

Global investors such as SoftBank Group, Sequoia Capital and Tiger Global are planning to build a common front to take on the draft e-commerce policy, which they believe is tilted towards Indian founders of the firms they have invested in.
 
Battle lines are being drawn as foreign investors scuttle to secure their investments worth of over $75 billion they have over the last decade or so.
 
According to sources, SoftBank Group has written to NITI Aayog, commerce ministry as well as officials of the finance ministry asking them to keep in mind the interest of investors and other stakeholders before finalising the e-commerce policy.
 
A delegation from 20 investors based out of countries such as the US, the UK, the UAE and Singapore would meet NITI Aayog, commerce and finance ministry officials over the next two weeks, sources have added.  “SoftBank reached out to the government and are asking them to make a fair and balanced e-commerce policy. In a scenario where almost 95 per cent of the capital in a company is pumped by investors, they not having any say are a matter of grave concern for these global players,” said a senior vice president of a US-based investment firm. SoftBank declined to comment on the issue.
 
While these companies have Indian founders, they are run mostly with the money brought from foreign investors, experts believe. So having a ‘protectionist’ attitude after selling stake to expand firms is unfair, they say.
 
The task force that has formulated the draft policy consists of founders and senior management executives of companies including Ola, MakeMyTrip, Zoho, UrbanClap, Paytm, Snapdeal among others.  
 
Most of the unicorns or billion-dollar valuation firms like Flipkart, Paytm, Ola, Zomato and Swiggy have had the maximum stakes owned by foreign funds. The founders of all these firms have either single-digit stakes in their companies or in low-double digits.

 
Many believe the idea of founders having the total control of the company with even minor stake holding will disrupt the decision-making process, which is now taken by the board of directors keeping in mind the interest of all parties.
 
In 2017, almost $21 billion worth of PE investments made its way into e-commerce companies and start-ups.
 
Investors believe this is a way for founders to stay in control of their firms and not something which is beneficial for the firm. Companies such as Ola and SoftBank, one of its biggest investors have had been at loggerheads over a number of issues, including a possible merger with Uber, which Ola has been trying to thwart.
 
Experts believe if the policy gives the liberty only to the founders to call all the shots, then investors would not be able to recover their money.
 
Industry experts are also of the view that this proposal could reward protection, not performance and could lead to abuse.
 
“We are seeking protection for a sector where for the last 10 years there have been investments of over  billions of dollars worth of FDI. When capital is infused into a company, it is for a price, which is based on the performance of the company and the control package the investor is getting,” said Bharat Anand, partner at Khaitan and Co. 
 
Industry experts say the recommendation under the policy for making amendments in Companies Act allowing founders to continue having control in spite of dilution will create problems to raise funding in an unfettered manner.