SoftBank is known to be one of the most prolific, high-profile investors in the Indian startup ecosystem. The Japanese telecom giant has driven funds into some of the biggest homegrown startups, like Ola, Snapdeal, Housing.com, and InMobi among other. While it has aggressively pumped capital into these ventures, the returns have been largely been a no-show. And the same has been reiterated in the company’s annual report for the fiscal year ended in March 2017.
In the said annual report, the Japanese giant has yet again announced that it has written down the value of its investments by a hefty 160.42 billion yen (approx $1.41 billion). This total amounts to the losses incurred only by the company’s two prominent investments in the Indian market, which includes Ola parent ANI Technologies Pvt. Ltd and Snapdeal parent Jasper Infotech Pvt. Ltd. Through a statement released in the filing, SoftBank said,
This mainly resulted from recording a loss as the amount of changes in the fair value of the financial instruments at FVTPL from March 31, 2016 to March 31, 2017. Financial instruments at FVTPL (fair value through profit or loss) included preferred shares of Jasper Infotech Private Limited and ANI Technologies Private Limited.
SoftBank has not written off the investments all at once but has been adopting a similar approach each quarter. As for the individual number, the Japanese giant has written off nearly $1 billion in the value of Snapdeal and the value of Ola shares has been reduced by about $400 million. But, it now leading the charge of acting as the mediator for several merger and acquisition deals across town.
Over the past couple months, SoftBank’s primary investment in India, Snapdeal has been flailing and has now almost been crushed under pressure from its e-commerce competitors. It has not only been able to secure fresh capital due to an internal strife among its early and largest investors but also failed to witness growth. Thus, the homegrown e-tailer has already trimmed its workforce by over 600 employees, cleared out massive offices, and the co-founders have given up their compensations.
Now, SoftBank, who is the largest investor in Snapdeal, has been trying to save the venture. Initially, it decided to pump more capital into the company but rolled back on its offer as early investors – Nexus Partners and Kalaari Capital – wouldn’t settle on a lower value.
Talking about Snapdeal’s current situation, SoftBank in a statement said,
The highly competitive e-commerce market in India has made a trend of the company’s business performance lower than initially anticipated.
It has now given up on pushing more capital into Snapdeal’s business and is instead eyeing the largest homegrown e-commerce giant, Flipkart. It has initiated talks, which SoftBank’s board has approved, with Flipkart to acquire Snapdeal’s business at a valuation much lower than one can actually imagine. It is being said that the said transaction is a done deal, where Kalaari is on board, SoftBank has already initiated buyback process from co-founders and is looking to pick a chunk of Flipkart shares from Tiger Global.
Ola, on the other hand, had also been struggling to add fresh money to its coffers to continue its competition against its arch-nemesis Uber — who has now increased focus on India and SEA after exiting China. The company’s Chinese operations were bought out by the company called the Uber of China — Didi, who’s just recently received $5.5 billion for global expansion. If we’re talking about funding rounds, Ola has recently also finally scored an investment in a down round, which valued the company at around $3.5 billion.
