Japanese tech investor and conglomerate SoftBank booked a total loss of $576 million for the September quarter in its shareholding in Paytm and Zomato, as tech stocks plummeted in the domestic market due to the selloff pressure and as both the companies continued to record losses.
Zomato contributed to a loss of $89 million, while Paytm contributed to an investment loss of $487 million. Softbank had originally invested $309 million in Zomato and its investment value stood at $220 million at the end of the September quarter. On the other hand, Softbank had originally invested $1.6 billion in Paytm and its investment value stood at $1.11 billion at the end of the September quarter.
Logistics unicorn Delhivery contributed a gross profit of $610 million to Softbank Vision Fund 1 (SVF1) during the quarter under review. SVF1 originally contributed a total investment of $397 million with a return value of $1.08 billion by end of the September quarter. PolicyBazaar contributed $318 million in profit to SVF1. The fund had invested $199 million in PolicyBazaar, with a return value of $517 million at the end of the June quarter.
For the quarter ended September, Softbank reported a net profit of 3,033.6 trillion yen, compared with a record net loss of 3.16 trillion yen reported in the June quarter. The conglomerate realised profits in the September quarter due to a one-time gain from its stake sale of Alibaba Group Holdings.
SoftBank gained around 5.372 trillion yen through the sale of 242 million shares of Alibaba, bringing down its stake in the company to 14.6% by the end of September, down from 23.7% as of June.
However, Softbank suffered a 1.02-trillion-yen loss in its two vision funds (SVF1 and SVF2) for the September quarter. In the previous quarter, both vision funds logged a 2.33-trillion-yen loss. In addition, SoftBank’s net asset value (NAV) was down to $115 billion in the September quarter, a $20-billion fall from $135 billion reported in the June quarter.
On the other hand, SoftBank Vision Fund 1 (SVF1) which manages a good chunk of publicly traded portfolio companies along with private companies, gained some 15.4% in investment value when compared with the previous quarter. SVF1 returned a gross investment gain of $13.56 billion in the September quarter. SVF2, which also manages a few public companies and private portfolios, posted a gross investment loss of $14.56 billion.
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Softbank’s founder Masayoshi Son said during the investor presentation that the impact of the pandemic on some of the investments can’t be measured since it was unclear “how deep the (Covid) valley would drop”.
“In the previous quarter, I explained that the (startup) unicorns are going to be failing down to the valley. But actually, unicorns are the ones that recovered well due to the online phenomena that emerged strongly post-Covid and we figured that the (Covid) valley was not that deep as we thought,” Son said.
He, however, pointed out that since it was impossible to measure the impact of Covid on the digital economy in the early days of the pandemic, Softbank decided to survive by disposing some of its investments and assets so that it can secure some backup cash for future investments.
“I wanted the company to grow safely and hence I have been raising money as much as possible to stretch myself so that we are able to create bigger transactions or acquisitions in the future. Even at the time of the dotcom bubble and the Lehman crisis, we had to sell and monetise assets to survive the market meltdown,” Son said.
Yet, Son made it clear that Softbank’s vision funds would drastically slow down investments in the next few quarters due to high volatility in the equity market worldwide. He added that the vision fund and other funds will be in a ‘defensive’ mode for the next few quarters with very selective investments being made out.
“We will be more selective from our future investments from the vision fund. Hence we structured a cost-reduction process…Under these (negative) global circumstances, we will be reducing our debt, or the debt ratio at least, to make way for a higher net cash position, so that we can safely drive the business in future,” Son said.