Japanese telecom and Internet giant SoftBank Group (SBG) has reported a valuation loss of $1.4 billion (¥160,419 million) on its two major investments in India.
SoftBank is the largest investor in cab-hailing app Ola and e-commerce marketplace Snapdeal.
The valuation loss disclosure was made by SoftBank in its annual report for the year ended March 31, 2017.
Fall in fair value
SBG reported a loss on financial instruments at fair value through profit or loss (FVTPL ) at ¥160,419 million ($1.4 billion) compared with a gain of ¥114,377 million ($1.1 billion) in the previous year, according to a statement. The loss resulted mainly from a fall in the fair value of financial instruments at FVTPL from March 2016 to March 2017.
“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,” SoftBank said in its annual report. The Japanese major has written off more than $1 billion (¥114,059 million) on valuation of its investment in Starfish I Pte, an intermediate holding company, which owns preferred shares in Jasper Infotech Private, which runs Snapdeal.com
Referring to the poor performance by the e-commerce major Snapdeal, SoftBank said the company's performance was weaker than expected. “The highly competitive e-commerce market in India has made a trend of the company’s business performance lower than initially anticipated,” according to the report.
Snapdeal, Flipkart
Significantly, the valuation loss is reported at a time when SoftBank is actively looking at merging Snapdeal with Flipkart after Snapdeal failed to gain market share. Snapdeal is the third largest e-commerce marketplace after Flipkart and Amazon. Reports have indicated that the merger between Snapdeal and Flipkart will close soon.
Betting heavily on the growing e-commerce sector in India, SoftBank invested about $900 million in Snapdeal. The Japanese giant is the largest investor in Snapdeal. The Japanese major made its first investment in Ola in 2014 when the cab hailing company raised $210 million. In December last, Ola raised $350 million in funding, including a $250 million investment from SoftBank at a valuation of $3.5 billion.
Snapdeal is currently valued at $7 billion while Ola at $3.5 billion. So far, SoftBank has invested over $1 billion in Indian consumer Internet segment. Apart from Ola and Snapdeal, SoftBank has investments in OYO Rooms, Hike Messenger, and grocery delivery platform Grofers. SoftBank had invested in real estate start-up Housing.com, too. However, Housing.com was merged with News Corp.-backed real estate portal PropTiger in an all-stock deal.
SoftBank Group Corp reported a 12.9% rise in its full-year operating income.
