Tiger Global believes India is likely to have the highest equity returns in the world going forward, his partner Scott Shleifer said during an investor call on Tuesday, even as he admitted the investor giant has made much more money in China and the US.
“We think this is the best place to invest,” says Shleifer 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 were able 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, funding more than a third of all unicorn startups in the country. The New York-based company, which ranks India among the top three markets globally, has deployed more than $6.5 billion in India since its inception, businessroundups.org reported last year.
India has attracted more than $75 billion in investment over the past decade from technology giants Google, Meta, Amazon and investors such as Sequoia, Tiger Global, Accel and Lightspeed. But the country’s burgeoning startup ecosystem has seen very few exits, and many consumer internet startups listed on the stock exchange over the past two years are trading significantly below their listing prices.
Shleifer acknowledged that the return on India so far has been nothing to write home about.
“Return on capital in India is historically poor. If you look at leading internet companies, be it Google, Facebook, Alibaba or Tencent, revenues have outstripped costs more than a decade ago. You had a great legacy over the past 17-18 years of materially profitable internet businesses. So the returns on stocks on the Internet became very high and the returns to investors were very high. But that didn’t happen in India,” he said on the call, which was also attended by Alpha Wave Global co-founder and partner Navroz Udwadia and saw participation from around 200 entrepreneurs, investors and bankers.
Until the past two or three years, India had about zero profitable internet-based startups, while banks and companies in other industries were thriving, Shleifer said. “As a result, returns on capital for investors like us are below average… way below. Our return in India is about 20% gross since inception. That compares to the mid 30’s in the US on the private side and low in the 50’s in China. But that’s in the past,” he said.
Shleifer claimed that India’s low yields are nobody’s fault, adding that the country’s own $3 trillion GDP is small. In recent years, he said, “we’ve seen increasing profit margins on market leaders is fantastic. So this big risk that you’d have a great country that would get a share of GDP, but not only would there be excess profit pools that could have a sustainable competitive advantage, we think that has fallen off a cliff.
He argued that historically low yields in India put the country in a better position than the US. “You didn’t have a lot of excess capital in India like few other places.”
Slides from Tiger Global’s presentation:
This is an evolving story. More to follow.
