Tiger Global believes India has the potential to generate the highest equity returns globally in the future, its partner Scott Schleifer said in an investor call on Tuesday, although he acknowledged the investment giant has made more money in China and the US.

“We think it will be a great place to invest,” said Shleifer of India. “We were able to buy 16 or 17% of Flipkart in 2010 for $8 million,” 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 one-third of Upstocks for $50 million.

Tiger Global is one of the largest investors in India and backs more than a third of all unicorn startups in the country. The New York-headquartered firm, which counts India among its top three markets globally, has deployed more than $6.5 billion in India since inception, TechCrunch reported last year.

India has attracted more than $75 billion in investments over the past decade from tech giants Google, Meta, Amazon and investors like Sequoia, Tiger Global, Excel and Lightspeed. But the country’s burgeoning startup ecosystem has seen very few exits, and many consumer internet startups that listed in the past two years are trading well below their list prices.

Schleifer admitted that the return to India has been nothing to write home about yet.

“Returns on capital in India have historically been squeezed. Be it Google, Facebook, Alibaba or Tencent, if you look at the leading Internet companies in the market, revenue has increased more than the cost of a decade ago. You had a great legacy of materially profitable Internet companies over the last 17-18 years. So the returns on equity on the Internet have been really high and the returns for investors have been really high. But that didn’t happen in India,” he said on the call, which was also attended by Navroz Udwadia, co-founder and partner at Alpha Wave Global, and was attended by around 200 entrepreneurs, investors and bankers.

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Until the past two or three years, there were almost zero profitable Internet startups in India, even as banks and firms in other industries flourished, Schleifer said. “As a result, the return on capital for investors like us is below average… Our returns in India have been like 20% gross since inception. That compares with the mid-30s in the US and low 50s in China on the private side. But that is the past,’ he said.

Shleifer asserted that India’s low returns are no one’s fault, adding that the country’s GDP of $3 trillion is itself small. In recent years, he said, “we’ve seen the growing profit margins among the market leaders have been fantastic. So it’s a big risk that you’ll have a large country that’s taking a share of GDP, but there’s not only additional profit pools that can be a sustainable competitive advantage, we think that It fell off a cliff.

He argued that historically low returns in India put the country in a better position to enter the recession than in the U.S. “You didn’t have as much capital in India as you had elsewhere.”

Slides from Tiger Global’s presentation:

This is a developing story. More to follow.


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