Monthly Archives: May 2017

SoftBank readies for India 3.0

With a new $100-billion technology fund, SoftBank is likely to go after market leaders

New Delhi: SoftBank Chief Executive Officer Masayoshi Son wants to propel his group towards what he calls SoftBank 2.0; in India he could be gearing for SoftBank 3.0. The Japanese telecom and internet conglomerate is gearing up for a third innings in India, after failing to make a mark with its first and second set of investments in India.

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With a new $100-billion technology fund, SoftBank is likely to go after market leaders (No. 1 or 2 players) in each market, say analysts. ‘‘This fund gives it the ability to buy into any market leadership deal across the world,” says managing partner of a Mumbai-based venture capital (VC) firm.

In India, it is likely to invest more in mature businesses. Its recent $1.4-billion investment in Paytm and likely investment in Flipkart is illustrative, even as it tries to salvage its existing portfolio.

SoftBank is in talks with Tiger Global to partially buy out its stake in Flipkart and may invest more in the company once it acquires Snapdeal. Last year, SoftBank had sold to NewsCorp-backed PropTiger and decided against putting in more money in Snapdeal.

While Tiger Global is a fund (which has to return money to its investors within a stipulated period), SoftBank invests from its balance-sheet and can afford to stay invested for a longer period and push for consolidation. “It can take longer positions on a fewer companies. You don’t want your investee companies to compete with each other and burn money,” says CEO of a SoftBank company.

“Flipkart makes sense for SoftBank as the combined business (with Snapdeal) could be larger, and it is getting it cheap (at a good discount to Flipkart’s existing valuation) Flipkart may not pay a fair value for Snapdeal but gets a strong investor,” says a partner with a VC firm.

Son missed investing in cab aggregator Uber, but is considering an investment of $6 billion in Didi Kuaidi, the ride-sharing service firm in China backed by Alibaba, Tencent and Baidu; it has backed GrabTaxi, the leading ride-sharing service in Southeast countries like Malyasia, Philipines, Singapore, Thailand, Vietnam and Indonesia. “It has no capital constraints or ego. If Snapdeal didn’t work out, it is willing to buy out Tiger Global in Flipkart, acquire 20 per cent stake and support Flipkart. It wants to bet on the winner or No. 2 player in each market,” says a VC.

Earlier this month, SoftBank had written off nearly $1 billion in Snapdeal and $400 million in Ola—the fourth consecutive write off in four quarters. In December 2016, SoftBank had written off around $475 million from its investments in the two companies. Observers say one should not read too much into these write-offs as these are part of its conservative accounting policies and a rounding-off error in its big balance sheet. SoftBank also led a $250 million funding in Ola in 2016, at a valuation lower than $3 billion versus $5 billion in 2015.

When Son had invested in five-six firms in India in 2014, he was betting on them to achieve market leadership. INT
He expected one of them to give a 5X return, other two 2X, while others to just return him the capital. ‘‘The return expectations are not the same for a $40 million deal and a $1 billion deal. If they can earn $2 billion on a $1 billion investment, it will be a big thing,” says a VC.

First innings

SoftBank first entered India in 1999 when it set up a VC firm called Eventures India with NewsCorp-backed media fund ePartners and Ispat Industries promoter P K Mittal. It invested $43 million in 14 companies, exited three, wrote off six and sold four companies to Nexus Venture before folding up during the  2000-01 dot-com bust.  Around the same time, a new fund called SoftBank Asia Infrastructure Fund entered India. It was a JV with networking company Cisco Systems. It had invested in Sify Technologies and IL&FS Investsmart before it morphing into SAIF Partners in 2004, and had become independent of SoftBank.

SoftBank did not make any new investments till 2011, when it had invested $200 million in mobile advertising firm InMobi. While it was the first to join the $100-million valuation club, it reported losses for several years and faces stiff competition from Facebook and Google. It also has a JV called Bharti SoftBank Holdings with Bharti Enterprises, through which it holds a stake in messaging app Hike (last valued at $1.4 billion).

Second innings

SoftBank’s second innings in India began in late 2014, shortly after Nikesh Arora was brought on board. Arora, who was to succeed Son as SoftBank CEO, left abruptly in June 2016 after an internal probe cleared him on some concerns raised by investors. Under Arora, SoftBank invested $ 2billion in India in a span of a year (see table). INT

In a quick succession, SoftBank had invested $627 million in e-commerce marketplace Snapdeal and led a $210 million round in cab-hailing service provider Ola. By mid-2016, its portfolio had expanded to six companies, including realty portal Housing, budget hotel aggregator OYO Rooms and on-demand grocery delivery service Grofers.

‘‘While they had picked the right spaces and invested in good teams, they didn’t get the timing right. They paid too much money at the top of valuation,” says managing partner of a venture capital  firm. Alibaba, with a 80 per cent share in the $1-trillion Chinese e-commerce market, is valued at $150 billion while the Indian e-commerce market is $15 billion today.

Business Standard : May 25, 2017

India offers tax concessions to Apple to expand production: official

India has offered to allow Apple Inc (AAPL.O) to import mobile handset components intended for use in local manufacturing tax free, a top government official said on Tuesday.

The tax concessions will be subject to the condition of increasing local value addition over a period of time.

Apple Inc wants to expand its contract manufacturer’s facility in the southern Indian tech hub of Bengaluru, a federal minister said on Tuesday, as the iPhone maker seeks a bigger share in one of the world’s biggest smartphone markets.

Cupertino, California-based Apple last week started making iPhone SE at its Taiwanese contract manufacturer Wistron’s plant in Bengaluru..

Apple, which sold over 50 million iPhones in the March quarter, down 1 percent year-on-year, is looking for new markets as its sales in China have weakened.

Among a set of tax concessions, Apple had initially sought a 15-years tax holiday for all components that it would import for setting up a manufacturing facility in India.

A panel of ministries rejected that demand and has offered a phased program to increase the share of local production in the manufacturing, Aruna Sundararajan, Secretary at the Ministry of Electronics and IT said.

“We have offered them tax exemptions on those components which could not be manufactured in India,” Sundararajan told Reuters, adding that local manufacturing component would have to be increased gradually.

Apple has agreed to increase local share in production over a period of time, but there was a difference between the plans of the two sides, she said.

Apple was not immediately available for comment.

India wants Apple to raise value addition share in phases of 3,5,7 and 10 years as the local capacity builds up, part of Prime Minister Narendra Modi’s plans to boost manufacturing.

Industry estimates the phased manufacturing program could increase local value addition in mobile phones manufacturing to 40-50 percent in the next three years.

Earlier, Ravi Shankar Prasad, the federal minister for Electronics and IT said government officials were in touch with Apple and other mobile phone manufacturers about expanding facilities and setting up new plants.

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“It will be a little early to say that India and Apple have agreed on the common ground,” said the official, adding India was ready to work out a roadmap to encourage manufacturing.

Industry estimates total value of mobile phones produced in India touched near 900 billion Indian rupees ($13.90 billion) compared with 540 billion rupees in the previous year.

“We are waiting for Apple to come back,” said Sundararajan.

Reuters: May 23, 2017

Paytm raises $1.4 billion from SoftBank, valuation soars to $7 billion

Paytm is now SoftBank’s biggest investment in the Indian start-up ecosystem

Paytm valuation has soared to $7 billion, following the SoftBank investment, making it India’s second-most valuable start-up.

New Delhi: Paytm has raised $1.4 billion from SoftBank Group Corp. in the largest funding round by a single investor in India, making the digital payments firm the Japanese company’s biggest bet in India’s start-up ecosystem.

The deal includes $400 million worth of shares that SoftBank will buy largely from Paytm’s early investor SAIF Partners in a secondary transaction, and a minor stake from founder Vijay Shekhar Sharma, according to two persons close to the development.

The deal values the company at about $7 billion post-money (including the investment) and will take SoftBank’s stake to about 20%, the two people said, requesting anonymity.

SoftBank, SAIF and Paytm did not comment on the valuation or secondary sale.

In August 2016, Paytm’s owner One97 Communications Ltd was valued at about $5 billion when the company raised $60 million from MediaTek Inc. Its valuation soared to $6 billion in March when three existing investors—Reliance Capital, SVB (Saama Capital) and SAP Ventures—sold their combined stake of about 4.3% to Alibaba Group Holdings Ltd and Ant Financial Services Group.

SoftBank, which has not seen too many successful investments in its India portfolio, is now banking on Paytm’s financial services business to replicate Alipay’s (Alibaba Group’s financial business) success in China.

“In line with the Indian government’s vision to promote digital inclusion, we are committed to transforming the lives of hundreds of millions of Indian consumers and merchants by providing them digital access to a broad array of financial services, including mobile payments,” said Masayoshi Son, chairman and chief executive officer of SoftBank Group. “We are excited to partner with Paytm in this journey and will provide them with all our support.”

Mint first reported on SoftBank’s likely investment in the Indian fintech start-up on 19 April.

Paytm plans to invest about $1.6 billion (around Rs10,000 crore) over the next 3-5 years towards enabling half-a-billion Indians to join the mainstream economy, the company said in a statement on Thursday.

“As a part of this vision, the company will soon launch the Paytm Payments Bank, a mobile-first product that will reach every corner of the nation, and focus on the millions of unserved and under-served Indians,” it added.

Paytm, India’s second-most valuable internet firm, will use the money to acquire 500 million new customers and launch a slew of financial services products such as wealth management, insurance and deposits and loans.

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“This business will require a lot of capital before it can start generating cash and hence we need long-term investors like SoftBank and Alibaba,” founder Sharma said in a telephone interview.

Payments bank licencees are not allowed to lend on their own, but Paytm has tied up with several financial institutions including banks such as ICICI Bank Ltd and Bank of Baroda and start-ups such as Capital First and Capital Float to lend to customers through them.

“India has presented us with the world’s largest opportunity in terms of financial services and we are confident its market will grow exponentially over the next decade,” said Eric Jing, chief executive officer at Ant Financial. “We will continue to extend our tech know-how to support Paytm’s growth in the country. And we welcome SoftBank to a great ride together to provide equal access to financial services in India.”

Paytm owner One97 Communications currently shelters Paytm’s mobile wallet business, including travel booking, movie ticketing and the payments bank business which is set to be launched on 23 May. The company recently spun off its e-commerce business PaytmMall under a separate entity Paytm E-commerce Pvt. Ltd and counts Alibaba Group, Alipay, SAIF Partners and Sharma as shareholders.

Getting SoftBank on board as a large shareholder will help Paytm have a long-term investor on its capital table and also help reduce the control of China’s Alibaba Group Holding Ltd, currently its largest shareholder. This will help Paytm pre-empt possible government concerns about a Chinese company having a strong hold on Paytm and the financial services sector, considered a strategically important one.

Investor interest in Paytm, the top online payment services provider in India, has increased after the government’s move in late 2016 to invalidate old high-value currency notes. The company’s move to launch a zero-cost QR Code-based payment solution worked very well during the demonetization days and has been adopted by millions of merchants since then. Paytm’s consequent emphasis on digital payments and a strong branding and advertising campaign to build the brand have also worked well.

Paytm was launched in August 2010 as an online recharge and bill payment platform and soon expanded into online commerce and mobile payments through wallets. In January 2014, it launched the Paytm Wallet, which is currently the largest digital wallet with over 220 million users and is accepted by over 5 million offline merchants across India.

source: Livemint: May 19, 2017

Royal Enfield to push expansion abroad

New Delhi: Royal Enfield (RE), the motorcycle manufacturer, plans to almost double its exclusive retail presence abroad.

The Chennai-based entity has identified Thailand, Indonesia, Colombia and Brazil as having the potential to become very large markets for itself over time. It will be investing in all four.

Siddhartha Lal, managing director of Eicher Motors, the parent entity of RE, said there were around 25 exclusive stores abroad and the plans was to add another 20-25 this year. The pace would continue in the coming year, too.
On the four country markets mentioned earlier, RE has five or six exclusive stores in Colombia and only a single one in the other three.

RE is adding single stores in a couple of other markets, too, with the hope that they reach a stage in the next year or two for an expansion.

“We expect that over the next five years, the developing markets will be on a different order of magnitude. Therefore, our retention would be much higher there,” said Lal.

Adding: “Our North America market, our first owned subsidiary there, has taken us a little bit of time — we have just been adding dealers and getting up to speed in the US market.” He said he expected a good year in America and Europe. There are five countries in the latter — Britain, Germany, France, Italy and Spain – where RE has about 50 dealers each. Some are exclusive to it but most are multibrand. The company is selling well in some of these markets but the size in each is low. And, normally of slightly higher powered motorcycles than RE has in its current portfolio.

“That means we are still a niche player here than a mainstream player, which we plan to be in developing markets,” said Lal. The oldest of its brand is Royal Enfield itself, in continuous production with the focus on 350-500cc ones.

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MD, Eicher Motors

source: IBEF: May 18, 2017

Japan offers support for Northeast projects

Japan has officially offered support for various ongoing as well as upcoming development and infrastructure projects in the North-Eastern region.

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The Ambassador of Japan to India, Mr Kenji Hiramatsu officially met the Union Minister of State (Independent Charge) for Development of North Eastern Region (DoNER), MoS PMO, Personnel, Public Grievances, Pensions, Atomic Energy and Space, Dr Jitendra Singh and conveyed his government’s inclination to invest in Northeast and also offer any other feasible support for new ventures. He said, the North-Eastern region of India has immense potential and with the kind of priority being given to the region by the Government of India and the Government of Japan looks forward to engage itself as a partner at different levels, both financially and otherwise.

According to Mr Kenji, the preferred States which the Government of Japan looks forward to invest in Northeast are Assam, followed by Manipur and Nagaland. He said, besides the trade and entrepreneurship interest, the Government of Japan also has a historic emotional link with the region because it was in the area around Manipur and Nagaland that during the Second World War, around 30,000 Japanese soldiers had got killed while fighting jointly with the British Army against the allied forces.Dr Jitendra Singh appreciated the offer made by the Government of Japan and said, while the Ministry of DoNER will look forward to engagement of Japanese resources in the making of roads and bridges in the North-Eastern region, the Japanese partnership could also be utilized in the recent initiative of developing inland waterways transport along River Brahmaputra down to Bay of Bengal as well as supplementing the Venture Fund announced by DoNER Ministry for “Start-Ups” in Northeast.

Group generated $1-bn revenue from innovations: Tatas

New business from innovations is set to accelerate with microbiome-based biomarkers, invented by TCS

The garnered $1 billion in annual revenue from 30 innovations that were showcased at Tata Innovista — an annual programme of the group to encourage, recognise and showcase innovations  — in the past three years.

The new business from innovations is set to accelerate with microbiome-based biomarkers, invented by Tata Consultancy Services (TCS) to diagnose preterm birth and colorectal cancer.

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“It is a tip of the iceberg,” said Gopichand Katragadda, group chief technology officer.

Microbiome is the collection of microorganisms in a part of the body. Microbiome-based diagnostics can help in asymptomatic diseases which have atypical condition showing no apparent symptoms. Currently, such diseases are diagnosed very late, affecting a lot of people.

TCS’ biomarkers are low-cost, non-invasive early stage diagnostic solutions. “This is the most promising in the last three years as each disease has potential market of a couple billion dollars,” said Katragadda.

The firm has already filed over 40 patent applications for this and got grant for 12. These biomarkers have got the Tata Innovista award under the piloted technology category.

Tata showcased over 3,300 ‘implemented innovations’ in its annual programme this year, representing a growth of 110% in two years. A significant number of these incorporate digital technologies, particularly in the areas of industrial automation, customer experience enhancement, and advanced engineering simulations.

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Implemented innovations include new products, new services, core processes, support processes, and design.

“Our industries are in the midst of tectonic shifts driven by the democratisation of digital, automation of decisions, and a focus on the environment. The has continued to lead in intellectual property generation from artificial intelligence to microbiomics and from driver-assist technologies to new 2D materials,” said Katragadda.

Implemented innovations are those that have been successfully implemented and have accrued benefits to the businesses. Piloted Technologies are at various stages of development and promise to deliver significant benefits after implementation.

The ‘Dare to Try’ category comprises courageous attempts that did not achieve the desired results but have potential for success. The Design Honour category are innovations focusing on design thinking.

A total of 52 Tata across 22 countries submitted their projects in Tata Innovista 2017.

Airtel plans ~19,000-cr capex this year

New Delhi: Despite a 72 per cent decline in net profit for the March quarter, telecom major Bharti Airtel said it was committing a capital expenditure of $3 billion (Rs 19,300 crore) this financial year, of which $500 million would be spent in Africa.

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Nilanjan Roy, its global chief financial officer, said so in a conference call after announcing its quarterly results. The share price closed on Wednesday at Rs 372.70, about eight per cent higher, despite the 72 per cent fall in the quarterly net profit to Rs 373.4 crore. During the day, the stock had soared 10 per cent to Rs 380.05.

Analysts feel the rally was mainly on account of the belief that the Africa region would do well in the future. In constant currency terms, revenues in its African operations grew by 2.6 per cent over a year. Data revenue at $157 million grew by 14.5 per cent on a year before, with a rise in the data customer base by 19.3 per cent and traffic by 77 per cent.

Consolidated revenue was down 8.8 per cent over a year during the quarter, at Rs 21,935 crore. The company bore the brunt of of Reliance Jio’s aggressive pricing strategy. The latter had launched its free voice and data plan in September last year, and then extended it till end-March. It currently still offers free voice services, while its data rates are lower than those of the incumbents.

The others in the sector allege Jio’s predatory pricing has hit the sector’s financial health. The telecom industry owes about Rs 4.6 lakh crore to financial institutions. INT

Bharti Airtel’s average revenue per user (Arpu) declined 18 per cent to Rs 158 in the period, against Rs 194 in the same period of the previous financial year. Data continued to cannibalise voice, as seen in the decline of the voice Arpu to Rs 114 from Rs 138 in the earlier March quarter. The data Arpu at Rs 162 was higher but 17 per cent less than the Rs 196 in January-March 2016.

The company made two key strategic announcements in the quarter, the acquisition of Telenor India and agreement with Tikona Digital Networks to acquire its fourth-generation technology (4G) business.

The firm stands to gain on the spectrum front from both deals. Acquisition of Telenor India would provide 43.4 MHz of additional airwaves in seven telecom circles — Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam. The agreement with Tikona means 100 MHz spectrum in the 2,300 MHz band and 350 sites in five circles.

source: Business Standard : May 11, 2017

DP World to invest $1 bn in Indian logistics sector

The Dubai-based firm now supports over 30% of India’s container trade

The UAE-based has committed $1 billion investment in Indian infrastructure, including logistics and container terminals.

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“We have already invested $1 billion and will soon another $1 billion,” Sultan Ahmed bin Sulayem, chief executive officer, DP World, said at the India Integrated Transport and Logistics Summit 2017.
There was also a need to reach internal markets, in cold storage facilities and networks, as well as use coastal and inland waterways to increase efficiencies, Sulayem said.
Earlier this year, had hinted at investment opportunities of over $1 billion in Indian ports and logistics. The Dubai-headquartered company now supports over 30% of India’s container trade.

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Transport Minister Nitin Gadkari said investments worth Rs 2 lakh crore were expected during the logistics summit. The three-day summit is being attended by players from Singapore, Hong Kong and Abu Dhabi.

Gadkari said 20 agreements were in advanced stages of finalisation among government agencies like the National Highways Authority of India, CONCOR, Major Port Trusts, Land Ports Authority of India, Central Railside Warehousing Company and state governments.

The Centre plans to build 35 multi-modal logistics parks in the country to cater to 50% of freight movement. The parks will lead to a 10% reduction in transportation costs and a 12% reduction in carbon dioxide emissions.

Land parcels have been identified and pre-feasibility studies initiated at six locations. The parks will be developed jointly by the NHAI, National Highways Infrastructure Development Corporation and state governments.
Fifteen such logistics parks will be built in five years and 20 more in the next 10 years. The government is working on a uniform policy for the development of these parks. The transport ministry has sought infrastructure status for these parks.

Baba Ramdev’s Patanjali eyes two-fold rise in sales at Rs20,000 crore in FY18

Baba Ramdev’s Patanjali Ayurved has clocked sales of Rs10,561 crore in FY17

Baba Ramdev said that Patanjali’s Noida facility would have a production capacity of Rs20,000 crore.

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MakeMyTrip raises $330 million from, Naspers, others

The $30 million investment from, Naspers and others will help MakeMyTrip fend off rivals such as Yatra, Cleartrip and OYO Rooms

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Bengaluru: Online travel company MakeMyTrip Ltd has raised $330 million in fresh funds from existing investors International Ltd and Naspers Ltd and a clutch of undisclosed investors in a move that will help it counter rivals in the ticketing segment.

MakeMyTrip said in a statement on Wednesday that it had entered into a definitive share purchase agreement with unnamed investors for ordinary shares worth $165 million (it plans to issue 4.58 million shares at $36 apiece).

The company added that it plans to issue 916,000 ordinary shares to Ctrip at $36 per share, and 3.66 million Class B convertible ordinary shares at the same price to MIH Internet SEA Pte, a subsidiary of Naspers.

The shares issued to Naspers will be convertible into ordinary shares of the company on a one-to-one basis, MakeMyTrip said.

The fresh capital infusion comes after MakeMyTrip, one of India’s first consumer Internet companies, which is also listed on NASDAQ, bought rival Ibibo Group’s travel business in India in an all-stock deal in October 2016 for about $720 million.

Makemytrip IN

The move created the country’s largest online travel firm which, according to a note by Morgan Stanley, is worth $1.8 billion.

The money will come in handy for MakeMyTrip which is seeing increasing competition in its ticketing business from rivals including Yatra and Cleartrip, as well hospitality start-ups including the SoftBank-backed OYO Rooms (Oravel Stays Pvt. Ltd).

Makemytrip INOver the years, MakeMyTrip has also started focusing on tours and hotel bookings that have higher profit margins than ticketing.

According to industry executives and experts, air ticket bookings offer a gross margin of 5-7% as against 10-20% hotel bookings offer. INTAccording to an investor presentation by MakeMyTrip in April, the firm’s air ticketing transactions grew 28% in 2015-16 and tours and hotel bookings by 126% the same year. Net revenue in the air ticketing business grew 14% year-on-year; that in the tours and hotels business rose 45%.


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A senior executive at MakeMyTrip said the company would invest in its hotels business and in redBus, the bus ticketing platform it acquired from Ibibo.

“As we penetrate deeper into tier II/III cities, budget hotels and homestays will be important,” said Rajesh Magow, co-founder and chief executive officer, India, at MakeMytrip, adding that this segment would drive growth. For MakeMyTrip, the premium hotel segment “is also important” because it helps the cause of consumer loyalty, Magow added.

MakeMyTrip’s revenues are currently split almost equally between ticketing and tours and hotel bookings, he said.

MakeMyTrip also plans to use the funds to expand overseas, especially in South-East and West Asia, and strengthen its business-to-business vertical to cater to small and medium enterprises, before rolling out the product for larger corporate entities.

“We are building a product which is a user-friendly tool to enable travel booking. This will be ready in 3-4 weeks. We will begin with SMEs as there are no massive structures and procurement processes (in them),” said Magow.

According to industry experts, the fresh capital will give the company ammunition to expand its lead over competitors.

“This capital is meant to grow the combined entity in an accelerated pace. The focus on hotels is understandable as this is an unsolved problem,” said Rutvik Doshi, director at Inventus (India) Advisors. “A large number of hotels do not have proper administrative or accounting processes and not even marketing capabilities. Getting the long tail of hotels online, especially the ones in smaller cities and towns, will require immense capital and effort.”

source: Livemint – May 04, 2017