Japanese telecom and internet giant SoftBank has just announced two big investments which has made it arguably the biggest investor in the new generation tech business in India, having committed over $1 billion in Snapdeal, Olacabs, InMobi and Bharti SoftBank. This is just the beginning, according to Japan’s richest man and SoftBank’s CEO Masayoshi Son. Son, who is on a short visit to India, said he is very bullish on the Indian market and he is seeing huge opportunities here.
Here are the key points he made in his separate media interactions on Tuesday:
SoftBank’s India focus will be on internet cos, not telecom: Son said SoftBank, which owns Sprint, the third-largest telco in the US, is looking to make as much as $10 billion investment in India over the next 10 years. However, it is only looking at internet space as it finds the telecom market already crowded.
Investment strategy: It is focused on investing in pre-IPO stage companies besides some at the seed-fund level and some at the early stage. SoftBank’s strategy is not to control or own a company and wouldn’t try to take majority stake but would look to be the largest shareholder with 30-40 per cent equity.
Snapdeal vs Amazon vs Flipkart: Son is indeed bullish on Snapdeal; he said it has the potential to become the Alibaba of India. Sharing his insights on the business models he pointed out that Flipkart follows the Amazon model of being one big merchant with a few other vendors and Snapdeal follows the Alibaba model where it’s all about third-party merchants. Nikesh Arora, who was roped in by Son recently from Google to lead SoftBank Internet & Media Inc (SIMI), added that it’s not yet clear what direction e-commerce would take in India but SoftBank has a preference for the Alibaba model and hence its bet on Snapdeal.
Valuations, returns: Son brushed off the talk of irrational valuation for e-com firms in India but acknowledges he is not chasing a 4,000x return (unrealised) that it managed in Alibaba from India. He harps on the big macro picture with India and China competing for the top two positions in the market and from a long-term view everything is cheap in India. Son said according to him one can almost close their eyes and still make an investment and get a great return. He acknowledged that he is not good at predicting the share price a quarter ahead but his expertise is thinking about 10- and 30- year time frame. He said he is not good at making a 30 per cent return but pretty good at making 10x or 100x or zero. Referring to losses piled by e-com firms he said this is still the investment stage and not the harvesting stage.
Local entrepreneurship, mobile internet proving to be an inflection point: Son said the skill-set of English language and software engineering is good for the Indian companies to be successful in the local market, and once they become successful here, they can scale globally. He said mobile Internet is taking off very quickly and he sees it as the inflection point where cheap smartphone has made access possible for a lot of internet services which brings a great opportunity.
(Edited by Joby Puthuparampil Johnson)
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