SoftBank suffers a major loss in its Indian Portfolio

By:Vandita Jadeja 2017-05-13

SoftBank Corp, a major investor in various startups across India has recorded a loss of $1.4 billion in the Indian portfolio. A majority of the losses has been booked on one of its biggest bets in India, Snapdeal. The losses from Snapdeal amounted to $1 billion out of the total loss of $1.4 billion. It is assumed that the investment in Ola booked the remaining losses. Due to the significant losses, SoftBank has been consistently playing a crucial role in the sale of Snapdeal to Flipkart, which will amount to $1 billion. The amount was reflected in the annual report for the year ended 31st March, 2017. The company has mentioned revaluation of the accounts due to policies, currency fluctuations and market dynamics. This revaluation has had an impact on the losses for the current year. It can be noticed that the investments made by SoftBank are not showing expected returns and has been devalued over a period of time. The investor is aiming to cut down on the losses and keep it to a minimum. 

Apart from Snapdeal and Ola, SoftBank is also an investor in Oyo Rooms, Housing and Grofers. In the annual report, SoftBank has mentioned that the gain or loss arising from the financial instruments, mainly consists of the changes in the fair value of the preferred stock investment. The highly competitive eCommercemarket in India has made it difficult to generate profits. The business performance has also gone lower than anticipated by the Japanese company. The valuation of Ola and Snapdeal has been reduced by $330 million and $550 million respectively. SoftBank has a subsidiary, Starfish I Pte Ltd, which owns preferred shares in Jasper Infotech. And Jasper Infotech is the main investor in Snapdeal. The downfall of Snapdeal has left a huge impact on the business of SoftBank.

SoftBank is aiming to merge Snapdeal with Flipkart and invest an amount of $1-$1.5 billion as fresh capital in the merged company. Snapdeal was the biggest competitor for Flipkart, but it started losing share last year and faced a major cash crunch. Ola raised fresh capital of $250 million from SoftBank and was revalued at $3 billion from the previous valuation of $4.5 billion. Ola also raised additional funds from Ratan Tata's UC RNT Fund and Falcon Edge. SoftBank is also working for the merger of Grofers with Big Basket in the future. It can be noted here, that the easiest way to reduce the losses for the investor company is by the merger of two companies. With a merger, the losses will be reduced and the company can be saved from the downfall. Being an investor, SoftBank has been working to find ways to save Snapdeal and merge it with Flipkart. The talks have been going on for a while now. It will be interesting to see how the merger goes and if the investor is able to recover some of its losses through the deal. 

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