SoftBank posts unexpected $3.3 billion loss even as Vision Fund arm records investment gain

SoftBank's Vision Fund arm turns profitable after 5 quarters

Japan's SoftBank Group Corp's Vision Fund investment arm reported a gain on investments of a little over $1 billion, for the first time in six quarters thanks to an increase in the valuations of high-growth technology companies, a type that the Japanese investment conglomerate prefers most, amid slowing interest rate hikes and optimism about artificial intelligence.

The Vision Fund investment unit, through which SoftBank invests in high-growth technology companies, reported a profit of $1.1 billion (159 billion Yen) in the June quarter. SoftBank, however, reported a loss of $3.3 billion (477,616 billion Yen), for the third straight quarter, due to unrealised losses in some of its marquee portfolio companies including China's Alibaba.

Analysts polled by Reuters expected the Japanese investor to report a net profit of  75 billion Yen ($525 million).

The marginal gain on investments is in line with its recent management commentary on adopting a more proactive investment and monetisation strategy. It will also likely bring cheer to India's burgeoning startup ecosystem, where SoftBank hasn't made a single investment in the last 15 months. It could look at opening up its purse strings post the investment gain.

SoftBank's Vision Fund reported a much smaller loss of 297.5 billion Yen (about $2 billion). This was due to the global rise of tech stocks, as investors favored the tech sector for its potential to withstand a potential macroeconomic decline linked to the banking crisis.

Between the two Vision Fund investment units, the fair value of SoftBank's listed portfolio companies at the end of the June quarter increased to $25.4 billion from $24.9 billion as of March 31, 2023.

The fair value of the Japanese conglomerate’s private portfolio companies, which account for a major part of its investments, also inched higher to $61.3 billion as of June 30 against $60.5 billion a quarter ago.

SoftBank, one of India's most-aggressive startup investors, has not participated in a single deal in India for almost 15 months. But the Japanese investor has been paring stakes in public companies like Paytm (One97 Communications) and private startups like Lenskart.

In fact, Paytm, one of SoftBank's biggest investments in India, turned breakeven for the Japanese investor, for the first time since its listing in November 2021 following a sharp rally in its stock, Moneycontrol reported in July. SoftBank is also looking at paring its stake in food tech unicorn Zomato via open-market transactions, thanks to the company's share price also rising due to improved financial performance.

In an interview with Moneycontrol, SoftBank Investment Advisers' CEO Rajeev Misra had said that the Japanese investor would look at doing follow-on rounds in portfolio companies in India as it was going slow on new investments. He further said that India’s market was “definitely” over-estimated.