India’s startups add gains of $400 mn to SoftBank’s Vision Fund in Q1

Japanese investment firm SoftBank’s Indian portfolio startups — Zomato, Paytm, Delhivery, and PB Fintech — collectively contributed gains of over $400 million to the SoftBank Vision Fund (SVF) during the quarter ended June 2023.

During the quarter, Paytm boosted the Vision Fund’s gains by $200 million, while Zomato and Delhivery each added $100 million to the fund, as indicated in SoftBank’s financial filings. However, there were no gains or losses recorded in the first quarter (Q1) from SoftBank’s investment in PB Fintech.

In the previous quarter, which ended in March 2023, these four listed startups within SoftBank’s portfolio generated an additional $100 million for the Vision Fund.

In the meantime, as of June 30, 2023, SoftBank’s SVF1 reported gross gains of $373 million from the parent company of insurtech firm PolicyBazaar, PB Fintech. The gain from logistics firm Delhivery reached $259 million by the same date.

Continuing their contribution to the fund’s gross loss, Zomato and Paytm accounted for these losses. Zomato’s total loss contribution stood at $46 million, while Paytm contributed $335 million to SVF1’s losses.

This represents an improvement on a quarter-on-quarter basis. Until March 31, 2023, Paytm’s overall loss contribution to SVF1 amounted to $526 million, and Zomato’s contribution was $131 million.

This development coincides with food aggregator platform Zomato achieving profitability for the first time in (Q1) of 2023–24 (FY24). The company reported a consolidated profit after tax of Rs 2 crore for the quarter ended in June 2023, compared to a loss of Rs 186 crore in the same period the previous year.

Revenue from operations for the Gurugram-based food delivery company exhibited a 71 per cent year-on-year increase, reaching Rs 2,416 crore in Q1FY24, up from Rs 1,414 crore during the corresponding period a year ago.

SoftBank has progressively reduced its shares in Paytm, Delhivery, and Zomato through multiple rounds. The investment firm recently divested an additional 2 per cent of its stake in One97 Communications, Paytm’s parent company, for an estimated $180-200 million. This move resulted in SoftBank’s total ownership in the Indian financial technology (fintech) company falling below 10 per cent for the first time to 9.15 per cent.

In a significant transaction, Paytm Chairman Vijay Shekhar Sharma is set to acquire a 10.3 per cent stake worth $628 million in the company he founded from a subsidiary of Chinese fintech giant Ant Group (formerly known as Ant Financial). This deal will make him the largest single shareholder.

The holding of SVF in Zomato has declined from 3.36 per cent to 3.35 per cent since March. As of June, SVF held a 14.51 per cent stake in Delhivery, compared with 14.56 per cent in March.

Despite SoftBank Group reporting an unexpected loss, its Vision Fund unit returned to profitability for the first time in six quarters. This was aided by an increased valuation for Arm, the chip designer poised for an upcoming initial public offering later in the year, as reported by Reuters.

From April to June, the Vision Fund unit realised an investment gain of approximately 160 billion yen ($1.1 billion). Excluding the boost from Arm, the combined losses of the Vision Funds amounted to 13 billion yen.

Overall, SoftBank recorded its third consecutive quarterly loss due to declines in the valuations of major investments, such as Alibaba Group, Deutsche Telekom, and T-Mobile US.

The net loss for the company reached 477.6 billion yen ($3.3 billion), a reduction from the 3.16 trillion yen loss during the same period in the previous year, but a significant deviation from market expectations of a 75 billion yen net profit.

Presently, SoftBank Vision Funds maintain a portfolio of late-stage and near-initial public offering (IPO) investments, including Arm, valued at over $37 billion. With optimism regarding a recovering IPO market, SoftBank anticipates significant future growth.

Although some market turbulence has subsided, the company remains mindful of the ongoing geopolitical risks, such as Russia’s invasion of Ukraine and China’s foreign and domestic policies, which continue to present challenges.

SoftBank stated that it is cautiously resuming investments to capitalise on opportunities in artificial intelligence and emerging technologies. Following a temporary halt, the Vision Fund invested $1.6 billion in the June quarter. However, this amount still constitutes a small portion of the fund’s initial investments.

“We believe it is the right time to cautiously resume investing,” said SoftBank.

“The prevailing financial market conditions do not inspire much optimism, and we anticipate a potential downturn. However, our strong financial position at the end of 2021–22 gives us the confidence to adopt a balanced approach that encompasses both defensive and offensive strategies,” it added.

With inputs from Reuters