Japanese investor and tech conglomerate SoftBank posted a total loss of $576 million for the September quarter in its stake in Paytm and Zomato, as tech stocks fell domestically on selling pressure and as both companies continued to post losses.
Zomato contributed an $89 million loss, while Paytm contributed an investment loss of $487 million. Softbank 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 initially 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 $610 million in gross profit to Softbank Vision Fund 1 (SVF1) in the quarter under review. SVF1 initially contributed a total investment of $397 million with a return value of $1.08 billion at the end of the September quarter. PolicyBazaar contributed $318 million in profits 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 net profit of 3,033.6 trillion yen, compared to a record net loss of 3,160 billion yen in the June quarter. The conglomerate made a profit in the September quarter due to a one-time gain from the sale of its stake in Alibaba Group Holdings.
SoftBank gained about 5.372 billion yen from the sale of 242 million shares of Alibaba, reducing its stake in the company to 14.6% at the end of September, from 23.7% in June.
However, Softbank suffered a loss of 1.02 trillion yen in its two vision funds (SVF1 and SVF2) for the September quarter. In the previous quarter, the two vision funds recorded a loss of 2.33 trillion yen. Additionally, SoftBank’s net asset value (NAV) fell to $115 billion in the September quarter, down $20 billion from the $135 billion recorded in the June quarter.
On the other hand, SoftBank Vision Fund 1 (SVF1), which manages a good portion of publicly traded portfolio companies as well as private companies, gained around 15.4% in investment value compared to the previous quarter. SVF1 generated a gross investment gain of $13.56 billion in the September quarter. SVF2, which also manages a few public companies and private portfolios, recorded a gross investment loss of $14.56 billion.
Softbank founder Masayoshi Son said during the investor presentation that the impact of the pandemic on some of the investments cannot be measured because it was unclear “how deep the valley (of Covid) has gone. would collapse”.
“In the previous quarter, I explained that (startup) unicorns were going to fail in the valley. But in reality, it was the unicorns that recovered well due to the online phenomena that emerged strongly after Covid and we thought the valley (Covid) was not as deep as we thought,” Son said.
He pointed out, however, 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 divesting some of its investments and assets so that it could secure a reserve of cash for future investments.
“I wanted the business to grow safely and so I raised as much money as possible to stretch myself so that we would be able to create larger transactions or acquisitions in the future. at the time of the dotcom bubble and the Lehman crisis, we had to sell and monetize assets to survive the market crash,” Son said.
Still, Son made it clear that Softbank’s vision funds will slow investment significantly in the coming quarters due to high volatility in the global stock market. He added that the vision fund and other funds will be in “defensive” mode for the next few quarters with very selective investments.
“We will be more selective in our future vision fund investments. So we have structured a cost reduction process… In these (negative) global circumstances, we will reduce our debt, or at least the leverage ratio, to make way for a higher net cash position, so that we can drive the ‘safe future business,’ said Son.