Lead Story

High Stakes

Flush with funds, foreign PE investors are making outsized bets. Will it pay off?

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I set out to make a conglomeration of No. 1 companies. That’s easy to say, but difficult to do. I can’t think of anyone else who has done it.” That’s Masayoshi Son for you. He is the maverick founder of Japanese internet and telecom giant SoftBank, which has invested $40 billion from its $100 billion VisionFund in technology companies across the world, including India. Son’s vision is unidimensional — to invest in unicorn companies that are leaders in a certain segment in any part of the world. Not surprising that e-commerce major Flipkart, ride-hailing start-up Ola and digital payments player Paytm have all landed up in the venture fund’s portfolio. Last year, SoftBank pumped $1.4 billion into Paytm. While founder Vijay Shekhar Sharma solda small stake, a clutch of investors, including SAIF Partners, ended up making a killing. The Delhi-based venture capital fund, along with other investors, made a partial exit from One97 Communications, the holding company of Paytm, with over 26x return, post SoftBank’s infusion. Prior to this deal, Alibaba along with its payments arm, Ant Financial, in March 2017, gave Reliance Capital, Saama Capital and Sapphire Ventures an exit route when they bought shares worth $250 million. Saama, which had invested in One97 in 2011, made an astounding 75x, according to research firm Venture Intelligence. Not surprising that Mridul Arora, managing director, SAIF Partners, believes that it’s a new normal. “For a reasonable period we will continue to see strategic capital from the US and China. I don’t see availability of capital going away anytime soon,” says Arora, sitting out of the fund’s Bangalore office.

Indeed, 2017 was a good year for private equity investments with a record $23.8 billion spread across 591 deals, surpassing the previous high of around $17.1 billion seen in 2015 and 55% higher than the $15.4 billion seen in 2016. The gargantuan appetite of Softbank was evident as it accounted for three of the top five deals worth $7.5 billion, providing early-stage investors much-needed exits. The Japanese conglomerate has invested more than $4 billion into Paytm, Flipkart and hotel aggregator OYO in 2017, nearly tripling its investment in India in a year. “SoftBank is not just a passive investor looking for quick valuation gains. We look for disruptive business models targeting large addressable markets,”

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