Japan’s SoftBank Group, which has been a prolific tech investor in India and across the world, will be cutting its investments to a fourth in 2022 from a year earlier as valuations of high-growth technology firms have plummeted globally.
“In the latest quarter from December to March, compared to the previous quarters, we have made it (investments) smaller. (Our investments had) peaked in Q1 (first quarter) when we made investments of about 2 trillion yen. But in Q4 (fourth quarter) you see a huge decline compared to Q1,” said CEO Masayoshi Son, addressing the press after the Japanese conglomerate declared its earnings earlier in the day.
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“Compared to the investment we made in the last year, I'd say half or even lower than half of the investment and of course it depends on our LTV (Loan to value ratio) level and investment opportunities as we strike that balance when it comes to making investments, but I would say compared to last year, the amount of new investment will be half or could be as small as a quarter,” Son added.
Son also said that the Japanese investment conglomerate will be taking a “careful approach” while investing in China and companies across the world and the ticket sizes would be smaller compared to last year. Son’s comments on China come in the backdrop of the recent regulatory tightening by Chinese regulators on tech companies.
“Risks for new investments in China have to be carefully managed and studied. So that's our current position for new investments in China. Careful does not mean zero, we believe that there are still a lot of great companies So for those companies we still would like to invest but relatively smaller (cheque sizes).Size in the United States will decrease, in Asia, Europe, those will also decline,” Son said.
“So it's kind of a worldwide phenomenon, especially starting from this year with the Russian invasion of Ukraine, equity market has been largely impacted,” Son added.
Son’s comments on slowing tech investments follow SoftBank’s weak earnings for the fiscal year ended 2021. The Japanese conglomerate reported a net loss of 1.7 trillion yen ($13 billion) for the fiscal year ended March 31 2022, as its listed portfolio companies were hit hard by falling tech valuations across the globe with investors pricing in interest rate hikes and China tightening regulations on the industry.
In India, the Japanese investment conglomerate has been an aggressive investor and has invested over $14 billion in technology startups in the country. Most of these investments have happened over the last five years. SoftBank has some of the country’s most-valued technology startups in its portfolio and in 2021 alone, SoftBank invested over $3 billion across 17 deals, Vikas Agnihotri, operating partner, SoftBank Investment Advisers had said recently at a media event.
The Japanese conglomerate saw two of its biggest portfolio companies getting publicly listed in India in 2021, which was a bumper year for initial public offerings in the country. The two companies--fintech unicorn Paytm’s parent One97 Communications and Policybazaar’s parent PB Fintech--however, received varied responses from public investors. PB Fintech’s share rose over 25 percent on its market debut, while Paytm’s shares fell more than 20 percent on the listing day. Paytm, which was also the country’s largest-ever IPO then, is down over 75 percent from its IPO price.
SoftBank’s two more portfolio firms--hotel aggregator Oyo and logistics startup Delhivery--are set to get listed in India this year. Both the companies had delayed their listing amid volatility in global financial markets. Delhivery is now set to list on the exchanges next week, but SoftBank has trimmed its offer for sale (OFS) component. Oyo’s IPO, meanwhile, is still awaiting SEBI’s approval and Moneycontrol had reported in March that SoftBank, along with a few other existing investors, are looking to do away with their OFS component altogether, looking at the hammering received by loss making companies like PB Fintech, and Paytm from public investors.
It can be noted that SoftBank has not invested in any major rounds in India this year yet amid a slowdown in the country’s startup ecosystem, which saw two consecutive years of hypergrowth and aggressive fundraising.
Incidentally, earlier this week, New York-based hedge fund Tiger Global, which also has been an aggressive investor in tech companies in India, marked its first seed level investment in what was a shift for the hedge fund that primarily invests at late stages. News agency Financial Times had reported earlier this week that Tiger Global was hit by losses of around $17 billion during the year due to sell off in global equity markets.