Japanese tech investor SoftBank's investment in India may fall to a third

Japanese tech investor SoftBank may end up investing around $1 billion in India in 2022, nearly a third of what it did last year, according to people closely tracking its plans. Last year, SoftBank undertook investments of $3.2 billion in 12 deals.

In the first five months of CY22, the giant investor has invested $400-500 million in five deals. In the past five years, it invested $11 billion in the country.

CEO Masayoshi Son recently announced that it had lost about $27 billion in its two Vision Funds for the year that ended in March as many of the major tech companies it invests in have struggled. SoftBank itself lost $13.2 billion during the last financial year and has decided to reduce its pace of investment.

The Russia-Ukraine war, Covid lockdowns in China, inflation, and general weakness in the equity markets have led to a dramatic fall in tech stocks globally. Son also said the group would invest only half or a quarter of what it did in 2021. 

While SoftBank declined to comment, according to people in the know, the more cautious approach towards India is primarily because of the volatility in the valuations of start-ups, which have made it difficult for specialists to undertake a fair assessment. Besides, several start-up founders who earlier were looking for late-stage funding are holding back and focusing on cost reduction to reach nearer to Ebitda- positive numbers, rather than raising money possibly at cheaper valuations.

SoftBank also reported an unrealised loss of $585 million as of FY22 against its $1.6-billion investment in Paytm, shares of which have been languishing in the equity market after listing. It has around a 15 per cent stake in the company. In Policybazaar, on the other hand, which also went public last year, the Japanese investor gained $402 million against an investment cost of $199 million.

Also, US hedge funds, which were active last year -- pushing up valuations of start-ups manifold -- have reduced their exposure this year, as the tightening US monetary policy and decline in stock prices back home have diverted their focus. CY21 was, of course, a bonanza year considering the fact that in 2019, Softbank invested around $750 million, according to estimates.

Those aware of the developments said that after the IPO of logistics company Delhivery, in which SoftBank owns around 17 per cent, the Japanese financial major may see another company, FirstCry, in which it has investments hit the primary market. The company’s DRHP has been pushed to July.

It also has an investment in Oyo Rooms, the initial offering of which was earlier expected in the last quarter of this year may get postponed to next year because it has now to update the DRHP with the financial figures until the September quarter. The valuation, according to those in the know,  could range $6-8 billion. The IPOs of Ola and Swiggy, in which SoftBank has a 40 per cent stake, too, are expected only next year, the sources said.

Among the deals that SoftBank has completed this year in India are Polygon, which raised $450 million in a round led by Sequoia, CommerceIQ, in which it put in $115 million, Firework (around $150 million, led by SoftBank), ElasticRun ($300 million, led by SoftBank). These investments have been much smaller than those during last year like in Swiggy (which raised $1.25 billion from SoftBank and other investors) and in Flipkart (which raised $ 3.6 billion, including from SoftBank).  

Tightening purse strings

• $400-500 mn SoftBank invested in 5 deals in the first five months of CY22
• $3.2 bn it invested in 12 deals in CY21
• $11 bn it invested in India in the past 5 years
• $13.2 bn SoftBank lost during last financial year
• $585-mn loss it suffered as of FY22 against a $1.6-billion investment in Paytm