SoftBank is powering up again: “If you have a deal, we have the money”

SoftBank did go slow on investing in India for a while, conceded Sumer Juneja, managing partner and head of EMEA and India at SoftBank Investment Advisers, attributing it to the cyclical nature of investing. "There will be times when we deploy a lot; there will be times when we get the liquidity outcome," Juneja said in an interview, adding there cannot be an investment "bazooka".

The Japanese investor is sitting on gains of a billion dollars in India this year, as two of its portfolio companies—Lenskart and Meesho—went public. The company has harvested more than $7.2 billion in exits from India in the last few years, with some of the notable public market exits in Paytm, Policy Bazaar and Zomato.

“If you have a deal, we have the money," said Juneja, though SoftBank has not set aside a specific sum for India.

The company has pumped in more than $10.6 billion across 20 Indian companies. Some of its top investments are in Flipkart, Oyo, Ofbusiness, Eruditus, Icertis, Whatfix, Mindtickle, Elastic Run, Unacademy and Globalbees.

“Some of these companies are likely to go public in another 12-18 months," Juneja said.

SoftBank-backed e-commerce startup Meesho on Wednesday debuted on the stock exchanges. It closed at ₹168.27 a share on Thursday, with a market capitalization of ₹75,942.46 crore, valuing SoftBank's 8.5% stake at close to $700 million. Other listed companies backed by SoftBank include Firstcry, Ola Electric, Delhivery, Swiggy and Lenskart. It is sitting on gains worth $4 billion through these listed companies.

“I think it is safe to say that India is one of the strongest performing geographies for the Vision Fund. And in terms of allocation, it used to be about 8-10% of the global pool," Juneja added.

SoftBank is flexible on its cheque size, Juneja said. Armed with more than $56 billion from its Vision Fund 2, the firm that wants to focus only on tech and AI will look to write smaller cheques, something it has not done so far in the region.

“Companies are becoming more capital-efficient. They're not raising as much. They've learned from 2022 (funding winter) that capital could disappear. With AI, they're becoming more efficient. And so, they're raising less capital. So, we are happy to also do smaller size checks," he added.

Competition is intensifying in the early-to-growth stage, with some of the global and homegrown players with ample dry powder, waiting to deploy cash in India.

According to Juneja, the firm is seeing a healthy flow in new deals. “I think maybe there was a lull for about a year or so, but now we're seeing a pretty solid pipeline of AI-first companies. So, we hope to start deploying."

The firm is scouting for opportunities in the AI space.

“We start meeting companies almost 12, 18, 24 months before we invest in those companies. And similarly, we are now meeting all the early-stage AI companies," said Sarthak Misra, partner at SoftBank Investment Advisers.

“The real question now is how fast this early traction can evolve into meaningful, scaled businesses. If that transition happens quickly, you’ll see investments flow sooner; if it takes longer, the pace of investments will slow accordingly," said Misra.

The company, however, focuses more on the application layer, as it expects such companies to scale faster than infrastructure companies, which can then become a sizable target.

"If you’re building at the application layer or offering a B2B solution, you can reach $30-50 million in revenue quickly if you hit product-market fit," he added. “Infrastructure plays scale much slower, because setting up things like data centres takes time. We’ll simply have to wait for those to reach scale."

SoftBank has also faced challenges at some portfolio companies such as Elastic Run, Globalbees, and Unacademy, eroding some sheen from its spectacular India performance.