SoftBank turns largest investor in Indian e-Commerce

The Japanese giant recently said that it intends to invest about $10 bn in India over the next few years

Japanese technology major SoftBank has become the largest investor in the Indian e-commerce segment. With its latest investment of $90 million in Housing.com, SoftBank’s overall investment in Indian e-commerce stands at about $1 billion.

In October, the company had invested $627 million in Snapdeal.com, while about $210 million was deployed into ANI Technologies’ taxi-booking service Ola Cabs. In November, Bharti SoftBank, a joint venture between Bharti Enterprises and SoftBank Corp, acquired 36.5 per cent stake in ScoopWhoop, an India-focused media start-up, for an undisclosed amount.

It is believed SoftBank owns 30 per cent stake each in Snapdeal.com and Housing.com.

Recently, the Japanese company said it aimed to invest about $10 billion in India through the next few years.

Aashish Bhinde of Avendus Capital says, “Softbank has done extraordinarily well by investing in digital businesses during the early stages of the market’s evolution, as was seen during its investment in Alibaba. Clearly, the Indian digital market is the next frontier for disproportionate value creation, which explains their bullishness on this space.”

SoftBank’s $20-million investment in Chinese e-commerce group Alibaba in 2000 is now worth $86 billion, following the Chinese company floating an initial public offering in the US. Through 10 years, Masayoshi Son, the founder of SoftBank, has increased the value of his investments from $3.3 billion to $99 billion, according to the company’s latest earnings presentation.

The Indian e-commerce market is estimated at $11 billion. It is expected to stand at $20 billion by 2015, a compounded annual growth rate (CAGR) of 37 per cent through 2013-15, according to a recent report by Motilal Oswal Securities. The e-retail segment would be the biggest growth driver (with an expected CAGR of 60 per cent), increasing from $1.7 billion in 2013 to $7 billion in 2016, it added.

Aakash Moondra, chief financial officer of Snapdeal.com, said, “The investment the e-commerce sector is witnessing is an endorsement of the global confidence in India’s growth potential. Globally, investors want to be a part of India’s large untapped growth frontier — e-commerce.”

Another large investor in this segment is Tiger Global, which has funded companies such as online travel portal MakeMyTrip and search engine Just Dial. Tiger Global also led a $1-billion round of investment in Flipkart. It has also invested in Myntra, Quikr and Hike.

Pramod Kumar, managing director, Barclays Capital India, said, “The online retailing segment in India today accounts for a mere 0.5 per cent, compared with 8-13 per cent in developed countries. The sector is expected to grow sevenfold to $30 billion by 2020 and the number of e-shoppers could grow from 20 million to about 90 million. Clearly, India is a massive e-commerce opportunity, which cannot be ignored.”

According to data from VCCedge, this year, 53 deals, worth $3.2 billion, have been recorded in the Indian e-commerce space, against 58 deals worth $587 million last year.

“The increasing adoption of devices such as smartphones, tablets, and laptops, and access to the internet through broadband, 3G, etc, have contributed to the rapid growth of the online consumer base,” said a recent report by Technopak. India’s Internet user base is expected to reach 550 million by 2020, with penetration of about 40 per cent, against the current estimated base of 243 million and penetration of 19 per cent.