New Delhi: Japanese investor SoftBank Group Corp. has written down the value of its investments in online marketplace Snapdeal and cab aggregator Ola by $1.4 billion.
The two—Snapdeal run by Jasper Infotech Pvt. Ltd and Ola run by ANI Technologies Pvt. Ltd—are among SoftBank’s largest investments in India.
“Loss on financial instruments at FVTPL (fair value through profit and loss) was ¥160,419 million ($1.4 billion) compared to a gain of ¥114,377 million ($1.1 billion) in the previous fiscal year. This mainly resulted from recording a loss as the amount of changes in the fair value of the company’s financial instruments at FVTPL from the previous fiscal year-end to the fiscal year-end,” SoftBank said in an earnings report for the fiscal ended 31 March.
“Financial instruments at FVTPL included preferred shares of Jasper Infotech Private Limited, which operates the e-commerce website Snapdeal.com in India, and ANI Technologies Private Limited, which operates the taxi booking platform Ola, also in India,” the report said.
“The valuation of our financial investments are frequently adjusted upwards or downwards due to accounting policies, currency fluctuations and market dynamics. The loss reported in today’s earnings represents the aggregate impact of such revaluations during the course of the entire fiscal year,” a SoftBank spokesperson said.
Despite the losses in India, SoftBank notched up its second-best annual profit on cost cuts and a rise in subscribers at Sprint Corp. SoftBank’s operating profit for the year to end-March climbed 13% to 1.03 trillion yen (around $9 billion) on flat revenue growth.
SoftBank, one of the biggest investors in Indian start-ups, is trying to sell Snapdeal to bigger rival Flipkart Ltd for about $1 billion. Meanwhile, Ola, which competes with Uber Technologies Inc., has managed to raise only about $350 million after hitting the fund-raising trail in June last year, with SoftBank alone putting in about $250 million.
Snapdeal, which has raised about $2 billion so far, saw its valuation hit about $1 billion from the peak of $6.5 billion in January last year, when the company raised $50 million from investors. Ola has also seen its valuation plummet from close to $5 billion in 2015 to $3-3.5 billion during the latest fund-raise.
According to research firm Tofler, Snapdeal clocked revenue of Rs1,457 crore in fiscal 2015-16 and lost Rs2,960 crore. Ola clocked revenue of Rs664 crore and lost Rs1,760 crore during the same period.
SoftBank is keen to sell Snapdeal to Flipkart to cut its losses on an investment which has not worked out. SoftBank picked Snapdeal over Flipkart and Paytm in 2014 but the marketplace has lost out to both in e-commerce and digital payments, respectively. Now, SoftBank is keen to invest huge amounts of cash in the two Snapdeal rivals.
Paytm, run by One97 Communications Ltd, is in talks with SoftBank to raise $1.2-1.5 billion in cash in a deal that could value the company at $7-9 billion, Mint reported on 19 April. The company is likely to invest in Flipkart if the Snapdeal sale goes through.
SoftBank entered the Indian consumer internet segment with a bang in 2014, writing big cheques for Ola and real estate platform Housing.com. The firm has also invested in grocery delivery start-up Grofers. Overall, SoftBank has invested about $1 billion in Indian consumer internet start-ups.
However, a significant number of its Indian investments have not worked as well as the company expected, prompting SoftBank to scout for mergers.
Housing was sold in an all-stock deal to rival PropTiger for about $70-75 million, valuing the combined entity at about $275 million, in January this year.
Online grocer BigBasket, run by Supermarket Grocery Services Pvt. Ltd, and Grofers have initiated talks for a merger that, if consummated, will also see SoftBank, which has invested in the latter, participate in a $60-100 million funding round in the merged entity, Mint reported on 19 April.
Reuters contributed to this story.