SoftBank Won’t Let Ama­zon Flow Freely in In­dia

CLASH OF TI­TANS Co has sig­nif­i­cant in­vest­ments in Flipkart, Paytm, Ola and Hike as it tight­ens its hold on the coun­try’s ecom­merce

The Economic Times - - Companies: Pursuit Of Profit -

Biswarup Gooptu & Supraja Srini­vasan

New Delhi | Mumbai: With the an­nounce­ment of its $2.5 bil­lion in­vest­ment in Flipkart ear­lier this week, SoftBank Group has be­gun to stitch to­gether an iron cur­tain against Jeff Be­zos’ Ama­zon.

The in­vest­ment in In­dia’s top ecom­merce com­pany was put to­gether at light­ning speed by the Tokyo-based tech­nol­ogy-to-tele­com con­glom­er­ate, barely two weeks af­ter it failed to push through a sale of its port­fo­lio com­pany Snapdeal to Flipkart.

It is be­ing seen as a strat­egy to not only cap­ture sig­nif­i­cant stakes in In­dia’s largest In­ter­net com­pa­nies, but also take Ama­zon head on in the world’s fastest grow­ing dig­i­tal econ­omy.

SoftBank has al­ready com­mit­ted more than $4 bil­lion to In­dia’s startup ecosys­tem in 2017, doub- ling what it had in­vested in the coun­try since 2014. Hav­ing in­vested in Paytm, Flipkart, Ola and Hike Mes­sen­ger, it now has stakes spread across the pay­ments, ecom­merce, ride-shar­ing and so­cial mes­sen­ger seg­ments.

But it is the in­vest­ments in Paytm and Flipkart, an­nounced within three months of each other in 2017, that po­ten­tially give SoftBank the strong­est am­mu­ni­tion to take on the Amer­i­can on­line gi­ant.

“I don’t think any­body is go­ing to be able to kill Ama­zon. Ama­zon is here to stay. It’s a ques­tion of find­ing the right play­ers to take on Ama­zon, in the right cat­e­gories, in the re­spec­tive coun­tries as well,” said Vinod Mu­rali, manag­ing part­ner of ven­ture debt firm Al­te­ria Cap­i­tal Ad­vi­sors.

The lat­est in­vest­ment, which will see Flipkart’s cash re­serves cross $4 bil­lion, will al­low the Bengaluru-head­quar­tered onli- ne re­tail firm to cre­ate a deeper moat as it con­tin­ues to stave off stiff com­pe­ti­tion from Ama­zon, which has also pulled out all stops to grab the pole po­si­tion in In­dia’s dis­count-fu­elled, highly at­tri­tional ecom­merce in­dus­try.

Be­zos has pledged to con­tinue plough­ing cap­i­tal into its In­dian unit, which has made sig­nif­i­cant gains over the past four years in Asia’s third-largest econ­omy.

Last month, ET re­ported that the Seat­tle-based on­line re­tail be­he­moth had crossed $2 bil­lion in In­dia in­vest­ments, as it in­fused an­other .₹ 1,680 crore in its main lo­cal unit, Ama­zon Seller Ser­vices, tak­ing the to­tal cap­i­tal in­vested to over .₹ 13,800 crore.

SoftBank’s in­vest­ment in Paytm can also be seen as a counter to Ama­zon, which launched pay­ments en­tity Ama­zon Pay ear­lier this year. In July, Ama­zon Cor­po­rate Hold­ings and Ama­zon.com in­vested .₹ 130 crore in fresh cap­i­tal in the Ama­zon Pay In­dia, which will di­rectly com­pete with Paytm.

“They (SoftBank) are look­ing at ac­quir­ing as much mar­ket share as pos­si­ble in In­dia. They are us­ing a mul­ti­pronged ap­proach through the lead­ers in all th­ese seg­ments,” said Vikram Gupta, manag­ing part­ner of ven­ture cap­i­tal firm IvyCap Ven­tures.

With an in­vest­ment strat­egy that will see SoftBank in­vest from its bal­ance sheet as well as its mega, tech­nol­ogy-fo­cused Vi­sion Fund, in­dus­try ex­perts be­lieve that the Masayoshi Son-led com­pany will also look to strike deals in sec­tors such as lo­gis­tics, health­care and ed­u­ca­tion.

“If I look at ed­u­ca­tion and health­care, you have to take bets well ahead of per­for­mance. Those are the two sec­tors that I would keenly watch out for and see what SoftBank does. It is a mat­ter of time,” Mu­rali said.

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