SoftBank Vision Fund, the largest pool of private capital ever assembled, will now be the primary investment vehicle for the deal-hungry Japanese investor in India. All new SoftBank investments will be made from the new $100-billion technology-focussed fund, which has received capital commitments from some of the world’s biggest companies, family offices and sovereign funds, said people briefed on the matter. Delhi will be one of the fund’s global hubs.
Additionally, all future follow on investments in its existing India portfolio, which includes online marketplace Snapdeal, ride hailing app Ola, hyperlocal grocery delivery venture Grofers and hotel room aggregator Oyo, will also be made from the new entity, which is expected to end its fund-raising exercise in a month.
“SoftBank will make no further investments. There cannot be any cherry-picking and conflicts of interest. All future investments will come from the fund, including follow-on investments,” said a source.
This comes as the Indian companies it has invested in are in fundraising mode, especially Snapdeal and Ola, which are locked in competition with US-headquartered rivals, Amazon and Uber, respectively. SoftBank has invested about $2 billion in India.
A significant portion of the Vision Fund’s corpus is, however, expected to be deployed in developed, rather than emerging markets, given the former’s greater ability to absorb larger amounts of private capital.
“India can’t absorb $10 billion,” said the person cited earlier. “China has enough capital of its own, with the likes of Alibaba, Tencent and Baidu. Therefore, in which emerging market will we utilise the fund?”
The fund will focus on “technologies of the future” such as the Internet of things, artificial intelligence, machine learning, robotics and satellites. Anticipated to make its investments over a five-year-period, the fund will look to pump in $3-5 billion per deal and has 14 years to return capital to its backers. That ticket size will it make the largest tech investor globally.
“Any major investment around the world will come to our table, because the corpus and the capacity (of the fund) is such that no major transaction will happen without us knowing about it, or without people asking us to participate, which is a good place to be,” said an executive.
Apple, Qualcomm, Foxconn and the family office of Oracle founder Larry Ellison have come on board as limited partners. Each is anticipated to invest about $1billion, reflecting the eagerness to support SoftBank Chairman Masayoshi Son’s corporate strategic vision.
The fund already counts Saudi Arabia’s sovereign fund, Public Investment Fund, as an anchor investor that’s committed about $45 billion. Abu Dhabi’s sovereign fund is also an investor. SoftBank itself will invest $28 billion in the London-headquartered fund.
The speed of the fund’s launch underlines SoftBank’s appetite as it looks to replicate its success outside China.
When contacted by ET, Soft-Bank confirmed the entry of Apple and the others as investors, but declined to share country-specific plans.
OUTPOST IN INDIA
India’s importance as a destination for SoftBank has been highlighted by its decision to create one of the fund’s global outposts in the country’s capital city along with Tokyo, San Francisco and London. It’s in the process of hiring people to scout for and manage investments in India.
“They (SoftBank) have about 25-odd people in Delhi, predominantly focussed on solar. But given that they have the infrastructure in AeroCity (in the Capital), they might look to add about half a dozen-odd people to look into investing (in the country),” said a source.
The fund is not expected to make fresh investments in ecommerce or the broader consumer technology space in India but will continue to back its existing portfolio.
Additionally, the fund headed by India-born Rajeev Misra may also scout for buyout deals, possibly in the country’s telecom sector. It will also invest in payment systems and financial services companies.
SoftBank’s Son has a close association with Bharti Airtel boss Sunil Mittal. The Indian company has been SoftBank’s strategic ally in India. Along with Foxconn, they set up a joint venture in 2015, SB Energy, to generate about 20 gigawatts of solar power. All investments in the solar sector will also be made through the vision fund going forward.
Given that the country’s technology and Internet sectors are still at a relatively nascent stage, it is unlikely that the fund will write large cheques for them. It could also look at distressed debt deals.
MISRA THIRD INDIAN EXEC IN SOFTBANK
Misra, 54, an alumnus of the University of Pennsylvania, Philadelphia, and the MIT Sloan School of Management, is the third executive of Indian origin in the Japanese conglomerate, which also counts Alok Sama, as its chief financial officer and president, and former LinkedIn executive Deep Nishar as vice-president of investments.
The Deutsche Bank and UBS fixed income veteran, who made his name betting against subprime mortgages just before the 2008 financial crisis, has a long association with Son, having played a key role in financing SoftBank’s acquisition of Vodafone Japan in 2006.
He was also instrumental in arranging financing for the heavily leveraged SoftBank for its $32-billion acquisition of UK-based chip maker ARM Holdings in July last year, also the Japanese major’s biggest bet till date.