Misra said that B2B SaaS, Fintech and Education continue to be interesting avenues for investments
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SoftBank Group Corp. could invest $5-$10 billion in India next year if it finds the right opportunities at the correct valuations, SoftBank Investment Advisers chief executive Rajeev Misra said on Thursday.
“We could invest another $5 billion to $10 billion in 2022 if we find the right opportunities at the right valuation," Misra told Bloomberg’s sixth edition of the ‘India Economic Forum 2021’.
“The quantum of capital we are able to invest today is not as high because the founders are not raising as much money. They’re raising $150-300 million. So each investment is roughly $200 million-$300 million. Unlike two or three years ago, when we could deploy in an Oyo or Paytm a billion dollars. The ticket size has come down dramatically," Misra said in response to a question about SoftBank’s capital commitment to India next year.
“So to invest $3 billion to $4 billion, it would require us to invest in 15 companies, (at a ticket size of) $200 million each. So, we have a local office, which is working hard and building relationships with the young entrepreneurs and building these relationships six months or a year before they need capital," added Misra.
SoftBank Group slumped to $3.5 billion of quarterly losses this September due to its Vision Fund unit bearing a $10 billion hit from the decline in share prices of portfolio companies affected by China’s tech crackdown.
Earlier this week, SoftBank said it would spend up to $8.8 billion over the next year to buy back up to 14.6% of its outstanding shares. “Indian companies are not just for India. There are a lot of Indian companies going global. So there are a lot of SaaS (software-as-a-service) companies from India, like Mindtickle, Zeta, others that are not just serving Indian brands but are going global [...] But India as a story is no different from the rest of the world. There is a lot of liquidity in the markets across the globe. The cost of capital has become very cheap. There aren’t many investment opportunities that provide double-digit returns—15% to 25% returns. Hence it’s a global phenomenon that a lot of capital is going into growing tech companies, excluding China," Misra said.
Speaking about the top opportunities by segment, Misra said business-to-business (B2B) SaaS, fintech and education continue to be interesting avenues for investments.
“We have invested in education through Eruditus. But I think fintech is the biggest opportunity because India is unbanked. We had (invested in) Paytm and Policybazaar. We’re looking at two other fintech companies because financial inclusion is a must in India. The big ones that we like are still B2B businesses that serve (other) businesses to improve their HR and sales quality," Misra said.
Paytm, one of SoftBank’s biggest Indian bets, concluded its initial public offering, with investors bidding for nearly twice the shares on offer. Now SoftBank is gearing up for its other big bets: ANI Technologies Pvt. Ltd, which operates Ola Cabs; and Oravel Stays Ltd, which operates Oyo Hotels and Homes to hit the markets.
Recently, SoftBank also invested in Walmart-owned Flipkart, marking its second innings with the e-commerce major after exiting the firm in 2018. “Walmart bought 80% stake in Flipkart, and we didn’t know how the company would look with Walmart owning 80% of Flipkart. We followed the progress of Flipkart and got convinced that it is going to be one of the two major players along with Amazon in India, and we went back and invested earlier this year. It was just that we didn’t know how the majority of what of Flipkart by Walmart would look for the next couple of years," Misra said.
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