Tiger Global believes India is likely to yield the highest equity returns in the world, 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 India’s most prolific investors, having backed more than a third of all the country’s unicorns. The New York-based company has deployed more than $6.5 billion in India since its inception, australiabusinessblog.com reported last year.
Shleifer acknowledged global investors’ concern that India has so far failed to deliver significant returns.
“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.”
Until the past two or three years, India had about zero profitable internet startups, while banks and companies in other sectors were thriving, he 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-1930s in the US on the private side and the low-50s in China. But that’s in the past,” he said.
Shleifer claimed that India’s low yields are no one’s fault, adding that the country’s own $3 trillion GDP is small. In recent years, he said, “we’ve seen incremental profit margins on market leaders are fantastic.”
This is an evolving story. More to follow.