Patience, luck key to finding cos to invest in: Ervin Tu, Ashutosh Sharma

Ervin Tu and Ashutosh Sharma of Prosus talk about their strategies for India and beyond

Just days after Swiggy’s successful initial public offering (IPO), in which Prosus remains the largest shareholder, President and Chief Investment Officer Ervin Tu and Ashutosh Sharma, head of growth investments for India and Asia at Prosus — one of the world’s largest technology investment groups, majority-owned by Naspers — spoke to Surajeet Das Gupta about their strategies for India and beyond. Edited excerpts from a video interview:

 

In the past three years, investing in startups has faced various challenges and required a rethink of strategy and focus. How has Prosus navigated this in India?

 

Ervin Tu: India is absolutely one of our focus areas and will remain so. We've invested over $8 billion in the country across several promising ventures, including our recent success with Swiggy. For us, India is the best-performing part of our global investment portfolio. If anything, we aim to replicate this success model worldwide.

 

What kind of investment do you foresee for India in the years to come?

 

Ervin: Between 2016 and 2021, we globally deployed an average of $2–3 billion annually. In 2021, we saw a high-water mark due to the $4.7 billion BillDesk deal in India (although it didn’t go through).

 

However, we don’t earmark specific amounts for India. Staying flexible allows us to act decisively when large opportunities arise, without the constraints of artificial thresholds.

 

Did the Ukraine-Russia war affect your deployment strategy?

 

Ervin: When the war broke out in February 2022, we curtailed large investments but continued writing early-stage cheques through our venture business. This was because we saw better risk/reward ratios at that stage. This was also the case In India. Last year it was largely about fixing issues in our portfolio. This year, you’ll see a return of more capital deployed in our results on Monday.

 

Has Prosus shifted its sector focus in India?

 

Ashutosh Sharma: There’s been some evolution. India is extremely heterogeneous, and the way you and I buy is very different from the way a customer in Tier-II-IV does. We’ve seen this success story play out with Meesho. We are now looking at what comes next for the 200–300 million Indians in areas like financial technology, mobility, and commerce.

 

How successful was the Swiggy IPO for you?

 

Ashutosh: We invested about $1.3 billion in Swiggy, and its current valuation exceeds $4 billion, yielding a handsome return. We remain its largest shareholder after a partial exit. This is only our third exit in India, following MakeMyTrip and Flipkart.

 

Do you prefer long-term investments?

 

Ervin: We’ve held our Tencent investment for over 20 years. Long-term compounding is a powerful investment strategy, but it requires patience and a bit of luck to find great companies.

 

Why does Prosus take substantial minority stakes and board seats in companies?

 

Ervin: We aim to hold meaningful stakes in our investments globally — be it India, Brazil, Romania, or Poland — because our portfolio’s net asset value is around $160 billion (market cap is US $ 95 billion) . Small stakes don’t move the needle for us. If we like a company, better for us to be able to ride the long-term compounding story with as much equity as possible. Also, we have a board seat, not just for visibility or influence, but because we think that way we can also advise them better.

 

What lessons have you learned from the big startup valuation meltdown, with the era of high valuations over and investors closing the tap?

 

Ervin: The data clearly shows that profitable companies with similar growth profiles are valued multiple times more than unprofitable ones. This shift in market dynamics was evident to us both as investors and operators. Our shareholders emphasised profitability, which led us to focus on fixing issues across our portfolio I alluded to earlier. The market continues to believe that profitability wins the day. It’s no longer the growth and growth era of 2021.

 

With challenges like Byju’s, what’s your outlook on the educational technology (edtech) sector?

 

Ervin: Our edtech portfolio hasn’t performed well overall, though there are exceptions like Eruditus, which has been a strong performer in India. While the long-term play of technology to enhance education remains exciting, in the short term, we’re in fixing mode and wouldn't anticipate that we would deploy big capital, more so when one is licking one’s wounds.

 

The world is fixated on the potential of artificial intelligence (AI).

 

Ervin: AI is a global priority for us. While huge capital is currently being deployed in large-scale AI projects, the risk profile remains high. We are two years into this and see better risk/reward at the early-stage level and are active in this space worldwide, from India to Brazil, China, and Europe. Our focus is on ideas that can complement and enhance our ecosystem of 100-odd companies in our portfolio.