After having hogged all headlines for its USD 627 million investment in online retailer Snapdeal , Japan's SoftBank Corp chairman Masayoshi Son says he is interested in investing in Indian internet startups.
In an exclusive interview to CNBC-TV18, Son says the firm's USD 10 billion investment announcement to India is not bound by any budget and if the opportunity present itself, the company may even invest more than USD 10 billion.
The investment and telecommunication company bought US' mobile firm Sprint Corp in 2013 but Son says, contrary to reports, that the company is not aiming to disturb India's telecom space but is very optimistic on the potential in Indian internet startups.
Given the plethora of e-tailers, Son says the company chose to invest in Snapdeal due to a personal preference and belief in its long-term success.
"Snapdeal has the potential to become India's Alibaba. Other peers like Flipkart have an Amazon-like model and Snapdeal is based on Alibaba's market place model, which we are more confident about," explains Son.
Below is the verbatim transcript of Masayoshi Son's interview with CNBC-TV18's Shereen Bhan.
Q: You say "we believe India is at a turning point in its development and we have confidence that India will grow strongly over the next decade or so". Is that a vote of confidence and can we assume that you will be investing about USD 10 billion or in excess of USD 10 billion into India perhaps over the next couple of years?
A: I have a strong wish and willingness to invest more like USD 10 billion in the next 10 years. We have financial capability, we are looking for opportunity. It all depends, USD 10 billion is not the most important thing and it is not the budget that we have to spend no matter what, that is not the case. If it takes more than USD 10 billion we are willing to do so, if it is less than that still we will be happy but that is about the image I have for over the next 10 years. That is my willingness.
Q: What makes you so confident about India and I want to talk to you specifically about your investment into Snapdeal, USD 627 million into Snapdeal, that makes you the largest investor in that particular e-commerce company. Why are you so confident about the Indian e-commerce story and do you believe that a company like Snapdeal has the potential to be an Alibaba in the future?
A: I strongly believe that Snapdeal has the potential to be Alibaba of India. We invested into Alibaba 14 years ago, as you said USD 20 million, but it was very small, it was nothing back then. But over the last 10 years it has really grown. People understand now Alibaba is a great company but only until several years ago people did not still understand the value of Alibaba. Right now Snapdeal has a significant growth and a great team. India's future opportunity is so huge that this is an exciting opportunity.
Q: Why Snapdeal and why not a company like Flipkart for instance. It has also seen a significant amount of foreign investment coming in?
A: In my view Flipkart is more like Amazon model. Alibaba model is closer with market place model. Snapdeal is closer to that model. It is just a preference and the belief which model has the stronger future; it is our opinion on one side.
Q: How much does this give you in Snapdeal and do you have the appetite to raise your investment in Snapdeal in the future because we don't know what eBay or some of the other existing investor in Snapdeal will do post this funding round?
A: Well we just made an investment I don't want to speculate about tomorrow or next year but it is a company which we would like to support for a long time.
Q: So how much do you pick up by paying this USD 627 million what is the stake that you get in Snapdeal?
A: We are not talking about specific of how many percent. We would be the largest shareholder, significant shareholder but not 51 percent. That is not what I am looking for. So we are comfortable where it is.
Q: You have announced an investment into Ola, Ola Cabs as it was previously known. So clearly the Indian start up space is something that has caught your fancy and your attention but the telecom sector in India and you of course have worked closely with Bharti, how exciting is the telecom sector looking to you and you have picked up Sprint, would you look at the possibility of investing in telecom in India where 100 percent Foreign Direct Investment (FDI) is allowed?
A: I am more focussed on pure internet start up companies now. In India there are enough number of telecom players, we don't need to come in to bother that situation, it is already enough, it is already crowded. They are self sufficient. So we are more focussed on internet start ups right now because that is where I believe huge excitement of the growth opportunity is coming.
Q: Ola have raised USD 210 million led by the investment coming in from Softbank, where else are we likely to see you put your money. There has been a lot of speculation that you are looking at Paytm as well. Is that accurate information?
A: We don't make specific comments on the other companies. We are looking into many other start up companies. This afternoon we are meeting ten other start up companies, tomorrow another 15 of them. So, I hope one of them or some of them would make us very excited.
Q: What are you looking for, if you are looking for 10 today and 15 tomorrow what is the criteria that you are going to be looking at before you decide whether you are going to put your money in or not?
A: The company has to be either leader in the segment of what they are doing, in the internet industry, either the leader or strong past to be the leader. I am looking at the management team, strong founder and their team. I am looking at the business model that can evolve to be a very successful business model. So I am looking at many different angles but it is like finding a new girlfriend. You don't look at only one angle.
Q: So how many girlfriends do you hope to acquire at the end of this visit?
A: It is a difficult and dangerous subject. I cannot have many girlfriends but I can have many business partners.
Q: Speaking of business partners clearly you are interested in the internet start-up space, the mobile start-up space at this point in time. What excites you the most because we are seeing interesting developments both as far as payment gateways are concerned, in the transportation sector with things like Ola and of course Uber the global company that has aspirations of growing very big in India, in the travel and the hospitality space where globally you are invested in as well. What looks most exciting to you from a value proposition point of view from the India story?
A: The two of them that we have chosen already are very exciting. However internet is a very wide subject. There are so many successful companies. Look at the US, there are so many successful internet companies in their own field. So, India is just the beginning for that excitement. I am sure there will be a huge opportunity of new rising stars.
Q: I was reading comments that have been made about you and an analyst said that Japan is not big enough for Son, he is looking at the world. Would India be the most exciting market for you today as far as your aspiration of growing in the world is concerned?
A: For next 10 years this is the country that I am most excited about. I would say this is the century – 21st century, if there are top two countries in the world or the top two economies in the world I think India and China would be the top two economies in the world, that is my belief. India has that much potential. So, with that belief right now India is not in the top two but in the long term view if that is the view people can invest almost in any business industry in India to be successful.
However what we are most good at, what we are most specialist about is our information industry, that is our focus. Then there is timing. The best timing to do so I believe now is the best timing.
Q: There has been a lot of debate on the valuation that Indian e-Commerce companies are commanding today. The road to profitability is a long one. We don't know whether it is foreseeable in the near future or not and hence people are saying that do they really deserve the kind of valuations that they command today in the marketplace. What would you say about that?
A: If you look at today's multiple over the profit or over the revenue, over whatever it is very high already. However if your belief is that India would be the top two economies in the world, it has a billion population and it has the intelligence, it has good English speaking society, it has all the software engineers which matters a lot for the information revolution. At the end software engineering is more important than the hardware. Hardware would become a commodity. India has the best skill of the software engineering, the English language, the population, the intelligence, what else do you need?
Q: So, valuations are not stretched?
A: It is such a small fraction of the future potential. Whether we buy 15 percent cheaper or not it doesn't matter. I am not good at making 30 percent return, I am good at making either 100X or zero.
Q: Let me talk to you about your investment in Hike and your aspirations as far as Bharti-Softbank that joint venture is concerned. You have pumped in a significant amount of money into Hike, the aspiration would be to take this service outside of India and to perhaps grow in other emerging markets India being just the test bed of the incubation centre. What are your aspirations as far as Hike is concerned and what kind of money can we see you pump in to that company going forward?
A: Hike is the opportunity that Kavin Mittal the son of Sunil Mittal. With his vision and passion it is a home grown service from zero and has grown very quickly. I think it has the opportunity to be like next Whatsapp or Facebook or LINE. It is growing pretty well. It has good technology engineers. I think it has a very interesting opportunity.
Q: There has been a lot of speculation on whether you are looking at LINE at this point in time. Is LINE on the horizon or on the radar as far as Softbank is concerned?
A: We never comment about the future investment.
Q: You like LINE?
A: I respect LINE, I respect VChat, I respect Facebook, the investment is something that we don't make comments on.
Q: How acquisitive are you feeling at this point in time because you have spent over the last 5 years USD 51 billion in acquisition that is the kind of war chest that you have deployed. Can we expect that number to go up considerably over the next 5 years? What can we expect in terms of your appetite for acquisitions?
A: I have lots of appetite.
Q: You could better that USD 51 billion number significantly over the next 5 years?
A: I have lots of appetite, passion but it all depends on many things.
Q: You have had phenomenal success. I don't think you would have imagined this kind of success for Alibaba yourself when you pumped in USD 20 million 14 years ago. Did you imagine this kind of success that Alibaba would meet?
A: People would hate me about this but I had a strong belief and no doubt about the size of the success. This is about the size of success I believed from day one. I had absolutely no doubt.
Q: What gave you that confidence in Alibaba at that point in time?
A: This segment of the industry, the channel, the timing, the management group, all those factors you look at. At that time Alibaba had only B2B. Three years later I discussed with them and we said okay we have to start B2C and C2C, that is 10 years ago. So, the first three years Alibaba's business model was totally different from what it is today.
Q: What do you intend doing with your 34 percent in Alibaba?
A: We will keep it. It is still growing very quickly. It is too early to sell. Why should you sell when you believe it is still growing so quickly?
Q: How soon do you expect a listing of an Indian e-commerce company for instance Snapdeal? Do you believe that we are still 3-5 years away from a possible proposed listing?
A: My preference is I want to delay it as much as possible.
Q: Another 10 years?
A: It is not for me to decide. It is the board and its founders they decide. I can discuss with them.
Q: Why would you like to wait? For what would you like to wait?
A: Why should you hurry? Being a private company gives us lot of flexibility, lots of freedom.
Q: If you believe that Indian companies should wait at least for 5-10 year period before they actually look at a listing, what is the road ahead in terms of profitability? How soon do you believe that we are going to see e-commerce companies in India start to make money?
A: Each company has their own style. My preference is to provide best service to the customers first.
Q: There have been some concerns on whether we are likely to see a dotcom bust that we saw for instance in 2000. You were there, you have suffered on account of it as well. Do you believe that the likelihood of seeing that kind of a debacle, that kind of a decline is exaggerated at this point in time, that the fear and the concern is exaggerated today?
A: The share price, the valuation fluctuate depending on peoples view and their confidence in the industry. However the key to me is continuously increasing the number of users, the access and usage itself, as long as you continue to grow that peoples valuation follow after that.
Q: So, you don't fear a dotcom bust today?
A: That is not what I am worried about.
Q: What are you worried about?
A: I am naturally optimistic person. I don't have that much worry myself. I don't have enough time to play golf. I am getting old I cannot hit long enough, that's what worries me today.
Q: As Japan's richest man today you are worried about your handicap on the golf course not worried about what you or don't do as far as your business investments are concerned as much, you are worried about getting older, what else would you like to do with your money?
A: I cannot spend money enough but money is not the focus of my life. It is a small issue. My focus of life is how can I contribute to the people? How can I make people happier through contribution to this information revolution? I feel more excited about our own vision and the business directions and partnerships with many of our friends, that is the most important thing.
Q: Your advice to start-ups who are watching this show today, you are veteran investor, you have invested in start-ups across the world, what is the single biggest lesson that you have learnt that you would like to share with start-ups?
A: Good times, bad times come but stay focused, channel your passion, strong belief, that is something that is most important.
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