Its partner, Scott Schleifer, said in a conference call with investors Tuesday that Tiger Global believes India will likely generate the highest returns globally in the future, though he acknowledged that the investor giant has made more money in China and the United States.
“We think it will be the best place to invest,” said Schleifer from India. “We were able to buy 16 or 17% of Flipkart for $8 million in 2010,” he said of the investment in the e-commerce giant, which is currently valued at more than $36 billion. “We managed to buy 10% of Inframarket for $8 million. We bought a third of Upstox for $50 million.”
Tiger Global is one of the most prolific investors in India, backing more than a third of all unicorn companies in the country. TechCrunch reported last year that the New York-based company, for which India is among its three largest markets globally, has invested more than $6.5 billion in India since its inception.
Schleifer acknowledged the concerns of global investors that India has not generated much revenue yet.
“Returns to capital in India have historically been declining.” If you look at the market-leading internet companies whether it’s Google, Facebook, Alibaba or Tencent, revenue exceeded cost more than a decade ago. You had a great legacy from the last 17-18 years of financially profitable Internet businesses. So the internet equity returns have been up, the returns for investors have been really high. But this did not happen in India.”
Until the last two or three years, he said, India had almost zero profitable online startups even as banks and companies in other industries thrived. “As a result, returns to equity for investors like us have been below average… much lower. Our returns in India are about 20% gross since inception. This compares to the mid-30s in the US on the private side, and the low-50s in China,” he said. But that is the past.”
Schleifer stressed that India’s low yields are no one’s fault, adding that the $3 trillion GDP for the country itself is small. In recent years, he said, “we’ve seen fantastically increasing profit margins for market leaders. So, this big risk of having a great country that would earn a share of GDP, but not only would there be excess profit pools they could have A sustainable competitive advantage, we think oddly enough, has fallen off a cliff.”
Slides from Tiger Global’s presentation:
This is a developing story. More to track.
