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 Masayoshi Son, chief executive of SoftBank, laid out a 10-year
investment plan for India on Tuesday, starting with the purchase of
a $627 million stake in fast-growing online marketplace Snapdeal.
Son's global ambitions flared into public view last year when
SoftBank bought No. 3 U.S. mobile carrier Sprint Corp <S.N> for
$21.6 billion.
The Snapdeal purchase comes as international investors hunt deals in
online retail in India, which has the world's third-largest Internet
user base but where e-commerce is still relatively underdeveloped.
For cash-rich SoftBank, owner of a third of newly listed Chinese
e-commerce giant Alibaba <BABA.N>, the move is the latest in a
series of deals designed to counter sluggish growth at home.
"I have a strong willingness to invest more like $10 billion in the
next 10 years," Son said in an interview on Indian CNBC after his
company announced plans to buy in Snapdeal, which connects small
businesses with customers in an online marketplace. "I strongly
believe that Snapdeal has the potential to be like the Alibaba of
India."
In a separate deal announced on Tuesday, SoftBank said it will lead
a $210 million investment round with existing investors in ANI
Technologies Pvt. Ltd, which owns a mobile application for taxi
bookings that competes with the likes of Uber.
SoftBank didn't disclose how big a stake it will have in Snapdeal,
which will use funds to expand operations to compete with bigger,
free-spending rivals Flipkart.com and Amazon.com <AMZN.O>.
The company did say it will become the biggest investor in Snapdeal,
where sales of everything from clothes to computers have brought in
around 25 million registered users and 50,000-plus merchants,
attracting international shareholders like e-commerce operator eBay
Inc <EBAY.O> and investment firm BlackRock Inc <BLK.N>.
One person with knowledge of the deal told Reuters SoftBank will own
about 30 percent of New Delhi-based Snapdeal, buying new shares in
the firm, valuing all of Snapdeal at around $2 billion. Snapdeal
declined to comment on the terms of the deal.
"SoftBank is a major investor in the internet space and them putting
in a large sum of money validates the growth of Indian e-commerce,"
said Niren Shah, managing director at venture capital firm Norwest
Venture Partners.
FLIPKART, AMAZON PUSH
Kunal Bahl, co-founder and chief executive of Snapdeal, said the two
sides were quick to negotiate a deal, taking just three weeks. "Most
of the capital investment we're going to make is in technology," he
said in an interview, signaling about $250 million will be spent
next year.
Bahl said the company plans to open a Bangalore innovation center in
two weeks, and Snapdeal was planning to hire about 500 engineers.
Pressure had been growing on Snapdeal to raise funds to compete as
online retail surges in India, with local industry leader Flipkart
raising $1 billion in July, and global e-commerce giant Amazon.com
pledging to invest a further $2 billion in its India unit.
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The SoftBank investment is in line with the $600 million-$650
million sources told Reuters Snapdeal had been seeking, and is the
biggest investment by a single investor in the e-commerce sector in
India.
With this round of investment, Snapdeal, co-founded by Bahl and
Rohit Bansal four years ago, has raised about $1 billion this
calendar year. The company said it plans to use the money to ramp up
technology and supply chain management systems, and add order
fulfillment centers to 30 cities. The company currently has 40
fulfillment centers in 15 cities.
Snapdeal will also look at making three or four bolt-on acquisitions
in the coming few months specifically in the area of mobile
technology and set up an incubation center to work with start-up
businesses in the mobile technology space, the company said.
CEO Bahl, who has said he also wants Snapdeal.com to become "the
Alibaba of India", told Reuters in September that the company was
focusing on improving its technology platform so that it could
connect more small-scale enterprises with buyers. Snapdeal plans to
expand its merchant base to 1 million in the next three years.
ARORA RISING
Both deals were negotiated under newly appointed SoftBank Vice
chairman Nikesh Arora, reflecting the company's recent aggressive
overseas expansion.
"India has the third-largest internet user base in the world, but a
relatively small online market currently. This situation means India
has, with better, faster and cheaper Internet access, a big growth
potential," Arora, a former Google executive, said in a statement.
Arora will be joining both Snapdeal and ANI's boards as part of the
investment, SoftBank said.
The India growth plan rolled out by SoftBank on Tuesday doesn't
indicate the company will take its eye off other investment
openings.
Earlier this month it announced plans to lead a $100 million
investment in Indonesian e-commerce giant PT Tokopedia. In one of
its highest-profile investments since buying Sprint, SoftBank said
earlier this month it was taking a minority stake in Hollywood movie
studio Legendary Entertainment for $250 million.
(Additional reporting by Teppei Kasai in TOKYO; Editing by Kenneth
Maxwell)
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