Japanese tech investor and conglomerate SoftBank registered its biggest ever losses after reporting a net loss of $24.5 billion (3.16 trillion yen) in the quarter ended June 30, 2022, as global tech stocks plummeted on the back of soaring inflation and interest rates rising across economies.
The Masayoshi Son-led investment firm added that a depreciating yen was another reason for its record losses. Those numbers compare with a net profit of about $5.7 billion (761.5 billion yen) that it posted in the same quarter of the last financial year.
In addition, SoftBank’s net asset value (NAV) was down to $135 billion in the June quarter, a $16 billion fall from $151 billion compared to the March quarter.
The cumulative loss on investments at SoftBank Vision Fund 2 (SVF2) — one of its investment arms — slipped into the negative territory in the June quarter.
On the other hand, SoftBank Vision Fund 1 (SVF1) which manages a good chunk of publicly traded portfolio companies also reduced by 46% in investment value when compared with the previous quarter.
However, SVF1 posted a cumulative gain of 1.51 trillion yen in the three months ended June, as against a gain of 2.83 trillion yen in the previous quarter.
The group said 59% of its portfolio companies reported a loss in the June quarter, up from 38% in the March quarter. The share of profit-making companies too dropped to 25% from 36% during the period, company financials showed on Monday.
Across its publicly traded Indian portfolio companies, Paytm contributed to a loss of $407 million at the end of the June quarter.
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SVF1 had originally invested $1.6 billion in the fintech firm, while the current investment value stood at around $1.19 billion.
However, Delhivery contributed a gross profit of $510 million to SVF1 during the June quarter. SVF1 originally contributed a total investment of $397 million with a return value of $907 million. While, PolicyBazaar contributed $384 million profit to SVF1. The fund had invested $199 million in PolicyBazaar, with a return value of $583 million at the end of the June quarter.
Both Paytm and PolicyBazaar are down over 50% from their listing value while Delhivery — which trimmed its IPO size — has seen roughly a 20% rise from its debut. Some of its other portfolio companies like OYO have filed papers for a listing but have delayed plans amid choppy public markets. Other companies like Swiggy, Unacademy, Ola too have signalled their willingness to hit the public markets soon.
To tackle these losses and shield itself from further damage, the company said the current policy at various Vision Funds would be to substantially reduce operational costs, adopt a heightened discipline for new investments and enhance the value of its portfolio companies.
In a bid to reduce operating expenses, Son said his company would introduce job cuts without providing further details while speaking at the investor presentation. Highlighting the cautious stance, SoftBank’s approved investment amount at vision funds had already fallen to a mere $600 million in Q1FY22, as against $20.6 billion in the same period in the previous fiscal. Also, significantly lower than the March quarter’s $2.4 billion — underscoring the pace of the funding slowdown.
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“We are in a defence mode, the word is still very volatile. Inflation is still severe, and interest rates are going up. In these difficult times, we kept on divesting our assets, we reduced new investments. We now have a much more managed, conservative approach in terms of new investments. I announced we’ll go into defence mode and we delivered a defence mode result,” Son said.
“I am still cautious, nobody knows what will happen next month. Covid is not completely over yet, inflation is still going on worldwide. Who knows, it’s a tough market. I will keep our company in the defence mode,” Son further added.