SoftBank management leadership team visits add weight to India market

Country accounts for 10% of Japanese investor's global AUM, the 3rd largest

A top management leadership team from SoftBank has been coming to India in the last few days to meet the founders of start-ups and other investors, signalling the country’s emergence as a pivotal market for the global investment giant.  

Based on current estimates, India accounts for nearly 10 per cent ($20 billion) of SoftBank’s invested assets under management (AUM) globally. That makes the country its third largest market after the US and China.

  

Sources said that this week SoftBank CEO Masayoshi Son’s close confidant, Greg Moon, who is the managing partner of Softbank Vision Fund, will be in Mumbai to have talks with their investee companies. He is part of the three-member top team which is managing Vision Fund-2 after Rajeev Misra, CEO of SoftBank Investment Advisers, took a backseat in the company.  

The other member of this crack team is Navneet Govil, COO, CFO and board director (technology and growth equity), who flew into Bengaluru a few days ago for the group’s first “Sozo Connect” which convened founders and investors from the local tech ecosystem. Keeping him company was Sumer Juneja, managing partner and head of India in SoftBank Investment Partners, and one who also oversees Europe, the middle east, and Africa. The push to India was kickstarted by Son, who met founders as well as Bharti Airtel chairman Sunil Mittal in Delhi recently.

A review of 26 portfolio companies shows that except for a few laggards, valuations in companies in which SoftBank has invested are far higher now than when it entered them. These include Lenskart, Swiggy, Of Business, FirstCry, and PolicyBazaar.

However, a spokesperson for SoftBank did not respond to queries. Based on available data, SoftBank entered Lenskraft at a valuation of $1.3 billion. Its last fund raise, however, was at a valuation of $4.5 billion — an increase of 3.4x. 

Similarly, when the global investor entered Swiggy, it was valued at $4.8 billion, while its last fund raise valued the company at double that number — at $10.1 billion. SoftBank also invested in B2b and low-profile startup, Of Business, at a valuation of $1.4 billion. Yet in its latest fund raise, the company’s valuation went up to $7.5 billion.

In demand

• India is its third largest market after US and China
• Its AUM in the country is $20 billion
• Senior management team which now handles the two Vision funds are in India to meet founders and investors
• Of its portfolio of 26 companies in India, SoftBank has seen a rise in valuations of several start-ups, including Lenskart, Swiggy, Of Business, FirstCry and PolicyBazaar. But some pose challenges. Returns from Paytm have been flat

First Cry is yet another startup whose valuation has shot up since SoftBank entered it. Valued at $900 million at the time, it is currently valued at $3.5 billion. In fact, an upcoming secondary sale is expected at this price. In Oyo Electric, SoftBank invested $250 million, which helped the company hit a valuation of $1 billion. But based on the latest fund raise, the company is now valued at $5 billion.  

In the listed company Policy Bazaar.com, SoftBank had invested $199 million. However, when it sold a part of its holdings in two tranches, it made $500 million. SoftBank still has a residual stake in Policy Bazaar, valued at around $130 million.

Some startups, however, pose challenges. SoftBank invested in OYO twice — once in 2015 when it was valued at $1 billion, and again later, when it was valued at $4-5 billion. Its carrying value in their books currently is at 3 billion, even though the company is negotiating secondary sales at around $7 billion.

Similarly, its investment in Paytm, part of which has been sold, has given nominal returns.    In several other companies, it is work in progress. For instance, edtech company Eruditus and B2B e-commerce platform ElasticRun have not raised any more money after Softbank entered them.

Hence, there are no valuation yardsticks.

In Meesho, which has gone from being a social commerce site to pure-play e-commerce, SoftBank invested at a valuation of $2.1 billion, but in its last fund raise, its valuation was at $ 4.9 billion, providing the Japanese investor a reasonable mark-up.