SoftBank kicks off $ 10 b India online spree, buys stake in Snapdeal
Thursday, 30 October 2014 01:03
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Invests $ 627 m in India’s 3rd-biggest e-commerce firm
Snapdeal ‘potential to be India’s Alibaba’ -Softbank’s Son
Funds needed to tackle rivals in India online retail boom
SoftBank also leads investment in Olacabs taxi app
MUMBAI (Reuters): Japanese telecom and media group SoftBank Corp has set its sights on Indian e-commerce in its aggressive expansion drive, saying it will invest about $ 10 billion in the booming sector as it took a strategic stake in one of its rising stars.
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 US mobile carrier Sprint Corp 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, 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 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 .
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 and investment firm BlackRock Inc.
One person with knowledge of the deal told Reuters SoftBank will own about 30% 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
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.
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, founded by Kunal 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 centres to 30 cities. The company currently has 40 fulfillment centres 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 centre 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.
