Alibaba and Softbank are joined to the hip – one is an investor in another and their founders share a long-standing relationship – but their stories are playing out differently in India.
Alibaba is said to have put a pause on new investments in India, financial newspaper Mint reported today. Alibaba’s major bets in the country – Zomato and Paytm – are currently in talks to raise funds, even as Paytm struggles to find a clear path to profitability. Over the last few years, Paytm has moved away from solely focusing on digital payments by launching verticals such as wealth management and e-commerce, and investing in adjoined internet businesses like gaming and movie ticketing and events.
In its course, Alibaba faltered with its bet on Snapdeal, the New Delhi-based e-commerce site that was once the No. 2 after Flipkart. Soon after Snapdeal’s founders blocked the company’s sale to Flipkart in 2017, its valuation plummeted to under $1 billion from peak-$5 billion resulting in erosion of asset-value for investors like Alibaba.
Even though Big Basket is a golden goose for Alibaba, resting on top of its segment, Zomato is said to be facing acute pressure from Swiggy and upstarts UberEats in the food-delivery market.
All in all, Alibaba is likely to reserve resources to support its existing bets. On the other hand, Softbank, which is investing from the $100 billion Vision Fund, is working on a clear strategy to back market-leaders in high-growth markets. Softbank backed Flipkart, Oyo, Ola, Uber (in the US), Paytm and Grofers, investing a total of $10 billion in India to date. That makes its play substantially larger in India as compared to Alibaba.
Softbank has also tasted some success already. While it could not get Ola and Uber to merge in India, which would have lowered losses at the two portfolio firms, Softbank made a cracker on Flipkart, which got acquired by Walmart last year. The Japanese investor made $4 billion on its investment of around $2.5 billion in less than a year of investing.
While in the US, Softbank is taking WeWork, the global office space leasing company, to IPO, in India, Softbank is a big force behind Oyo setting up and buying assets in China, Japan and the US. It is also nearing a deal to invest in eye-wear retailer Lenskart and news and media company Dailyhunt.
For now, Alibaba is cautious and SoftBank ploughing through, but status quo hardly stands in the start-up ecosystem.