The capital committed also includes deals that are yet to be officially announced.
The Vision Fund is estimated to have invested around $15-18 billion globally, and about 15-20% of that has come to India. “The key is to find interesting companies where we like the founder and the valuation,” Misra said, adding that the cash deployment in India this year was ‘quite a big number’.
“Now, the pendulum is swinging a little bit in our favour. Earlier term sheets were flying around, public markets were hot, valuations were crazy. I believe, over the last four years, we are the largest tech investor in India and will continue to be that way.”
Among the most well-known and high-profile global technology investors, SoftBank has recently placed bets on social commerce venture
Meesho and banking technology platform
Zeta even as a bunch of deals are yet to be made official here in India.
As reported by ET, SoftBank
is close to investing around $450 million in Swiggy along with infusing $100-150 million in companies like
Whatfix, a software-as-a-service (SaaS)-based digital adoption startup, and
OfBusiness, a business-to-business ecommerce platform.
The heightened dealmaking by the firm comes amid a larger technology-led rally in the US public markets, as well as
Vision Fund’s $36.99 billion profit for the fourth quarter ended March 31, 2021. Successful IPOs by portfolio companies such as US-based food delivery app DoorDash Inc., South Korea’s Coupang, and used-car trading platform Auto1 Group in the past six months have aided its enormous paper gains.
Public Versus Private
Misra, however, said in the next 6-7 months, the global stock markets will fluctuate, but the private market for technology investing will remain very strong with plenty of liquidity.
As for the Indian public markets, he said it has been surprisingly resilient.
“The Indian public markets despite Covid-19 is in great shape. So, Indian tech companies, including our portfolio firms, could go public in India where they will get better multiples,” he told ET.
Paytm have lined up for their public market debut in the next 6-8 months. The fund, however, won’t invest in a company that’s going public over the next 6-9 months as part of a pre-IPO round.
Our mandate is to invest in “tech disruptive companies” over a longer period of time, Misra said. Specifically on Paytm, he said they won’t sell their stake in the near term if the IPO happens, as proposed. “We are long-term investors and do not plan to exit in the near term. I have not had a discussion with Vijay Shekhar Sharma (Paytm’s founder) on the valuation… The market will decide the valuation. We are clearly not selling now…”
If the Paytm IPO goes through, its Chinese investor Alibaba
will likely dilute its shareholding, ET reported last week. This may help the Noida-based company lower regulatory scrutiny over its Chinese ownership amid geopolitical tensions between the two neighbours.
The Alibaba Group owns around 30% in Paytm’s parent One 97 Communications. ET reported that Paytm’s board has approved its plan to go public by November this year. While the digital payments firm was last valued at $16 billion in its previous financing, a Bloomberg report said it was aiming for a $25-30 billion IPO valuation. SoftBank holds over 20% in Paytm’s parent One97 Communications.
A lot of the public market exuberance was generated by SPACs—or
special purpose acquisition companies—in the US. SoftBank has been riding the SPAC boom with many of its companies opting to list by merging with these vehicles. SoftBank’s Indian portfolio firms like grocery retailer Grofers and logistics tech platform Delhivery had explored the SPAC route, but those didn’t materialise.
According to Misra, a finance veteran with stints at Deutsche Bank and UBS AG, there were 300-400 SPACs in the US, but many of them were unable to consummate an M&A and buy companies. “The SPAC market was 75% of all US IPOs. Tech IPOs this year have underperformed the S&P because they are overvalued—maybe 70% of them are below the IPO price. And while the global markets will be fine this year, they will be highly volatile.”
Vision Fund II
After the WeWork debacle, SoftBank Vision Fund struggled to raise outside capital amid questions being raised on its strategy of backing loss-making startups at frothy valuations.
For the second edition of the fund, it received a corpus commitment of only $10 billion from SoftBank itself with no external sponsors, when it launched. This was in stark contrast to the $100 billion capital pool it had amassed in 2017 with Saudi Arabia’s Public Investment Fund (PIF) alone investing $45 billion.
The fund may not bring external investors immediately even though there is renewed interest among sponsors compared to a year ago. Vision Fund 2 has already invested $15-20 billion with a portfolio of 70 companies. Its corpus has increased to $30 billion, fully financed by SoftBank, Masayoshi Son, CEO of SoftBank, recently said during an earnings presentation. Vision Fund II could see its size go up to $40 billion depending on the deployment of the current capital in the fund.
Talking about the impact of Covid-19 second wave on its India portfolio firms, Misra said it has been painful across the board. “The Indian portfolio companies are in pain—I am talking about the personal side. Then there is the business side, where some too are feeling the pain. But businesses like Delhivery, Meesho and Unacademy have had good tailwinds. Most businesses will fix themselves soon,” he said.
While these companies have benefited from the digitalisation wave because of the pandemic, Vision Fund’s portfolio firms like Oyo Hotel & Homes and Ola continue to be under pressure for over a year now. If anything, the second wave has had a more intense impact on these businesses. “They (Oyo) have cut costs dramatically, and have to weather the Indian Covid situation now,” he added.
Oyo is reportedly seeking to raise debt of $600 million. The company is seeing positive traction on refinancing and getting ‘sizable debt’ which is cheaper than equity, he said.
Oyo is one of the companies that used UK-based, now bankrupt, Greensill Capital’s financing besides other Vision Fund companies like construction startup Katerra. SoftBank Vision Fund is among Greensil’s largest investors. According to a report in The Information, Katerra is shutting operations after raising more than $2 billion from investors—primarily SoftBank which is a majority shareholder.
When asked about the fund’s investments in traditional businesses which were mostly offline in nature, Misra admitted that it had made a few mistakes while placing bets. “We have made mistakes but tech-enabled is not our investment hypothesis. Our investment hypothesis is that with scale and with data, companies create moats and better products at cheaper prices. Oyo and Airbnb are in that category. Now, if you cannot execute it, that is a different issue,” he said.