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SoftBank relaxed about overpaying of India investments

The head of SoftBank ’s $100bn Vision Fund has said he does not worry about overpaying when investing in India’s tech start-ups, because its multibillion-dollar bets will pay off as mobile internet use booms. Over the past 18 months, the Vision Fund has been by far the biggest driver in a new surge of funding in India’s tech sector, pumping $5bn into companies ranging from fintech group Paytm to hotel chain Oyo Rooms. The scale and pace of its investments has prompted some in India’s financial and technology industries to question their prudence.

But Rajeev Misra, SoftBank executive vice-president and the Vision Fund’s chief executive, said the investments were aimed at capitalising on a huge surge in internet access in India amid a large drop in mobile data prices, driven by new telecom operator Reliance Jio.  “With the proliferation of smartphones, cheaper data, faster networks, the penetration of internet services to the masses has increased dramatically,”

Mr Misra said.

“When we invest, we believe the returns will be three to four times the investment — so how does it matter if we pay 10 or 20 per cent more or less?”

SoftBank announced last week the Vision Fund would open a permanent office in Mumbai to oversee its investments in the country. It will be led by Sumer Juneja, a former Goldman Sachs banker poached from Palo Alto-based Norwest Venture Partners. Rajeev Misra says he has full faith in Vision Fund’s $1.4bn investment in Paytm, the mobile payments group Since SoftBank started making investments in India last year from the Vision Fund, which includes $45bn contributed by the Saudi state, some in India have argued that it is rushing to deploy capital.

“They’ve got a big hammer and they’re looking for nails,” said one Mumbai-based technology analyst.  Among the fund’s biggest bets has been its $1.4bn investment in Paytm, a mobile payments company that faces a competitive onslaught from US rivals WhatsApp and Google.  “Paytm is a substantial leader over WhatsApp,” Mr Misra said, noting that the Indian company has more than 300m registered users. “We have full faith that it can maintain a lead.”

He resisted the idea that SoftBank had overpaid for its Indian investments, saying that SoftBank invested in Paytm at half the company’s latest $10bn valuation, and earned a 50 per cent return when it sold its stake in online marketplace Flipkart this year, months after investing.  FT Archive The Big Read SoftBank: inside the $100bn fund shaking the tech world Beyond its Vision Fund investments, Japan-based SoftBank has invested $4bn of its own corporate funds in India — attracting notice in 2014 with investments in start-ups including property website Housing.com and ecommerce platform Snapdeal.

While the valuation of both those companies subsequently fell dramatically, SoftBank has continued to pump investment into Ola, a Bangalore-based ride-hailing company that is locked in an expensive battle with Uber’s Indian subsidiary. Since SoftBank bought a $9bn stake in Uber in December last year, there has been speculation that it would seek to engineer a merger between the two businesses, but Mr Misra played down this prospect.  “It’s up to the companies,” he said, adding that “competition issues” could complicate any attempt at a merger.

Oliver Smith

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