SoftBank has $13 billion unspent in India but Masayoshi Son is not betting on his own ‘vision’

  • SoftBank is looking to invest in secondary deals in India i.e. buy out investors in other startups.
  • Many of SoftBank’s star bets in India are either struggling or staring at an uncertain future
  • Rajeev Misra, the CEO of the SoftBank Vision Fund, reportedly said that talks are underway for 15-20 deals.
SoftBank Vision Fund has invested over $10 billion and has $13 billion more to invest in India. That would seem like good news for new startups— or its existing bets like Ola, OYO, or Paytm— but it really isn’t.

The Japanese billionaire Masayoshi Son’s India office would rather spend that money on buying out investors in other startups because there is a shadow on the prospects of its current investments⁠; the COVID-19 coronavirus pandemic has hurt some firms and some others were struggling even before the outbreak.

In an interview with Economic Times, the fund’s CEO Rajiv Misra said, “We are actively looking at India, to invest at the right valuation. SVF1 and 2 are both interested in buying secondary positions from early-stage investors who are wanting to exit as their fund lives come to an end. Next three months, we will announce deals as currently we are in mid-stages of talking to 15-20 companies for both secondary and primary investments.”

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Misra also told ET that SVF1 has invested $81 billion so far and has also returned $10.7 billion to investors. The fact is SoftBank has already bet over $10 billion in India’s startup ecosystem but many of its bets are bleeding or staring at an uncertain future.

SoftBank Vision Fund star India investmentsLast reported valuation
Delhivery$1.5 bn
FirstCry$1.2 bn
Grofers$650 mn
Ola$5.7 bn
OYO$10 bn
Paytm$16 bn
PolicyBazaar$1.5 bn

The fault in his stars

For instance, OYO, which owes a lot of its $10 billion valuation to the share buyback by the founder Ritesh Agarwal, before coronavirus rattled the world, is part of the hospitality industry whose prospects are bleak at best in the near to medium term. The recent spate of problems, including the recent layoffs, further dent the brand value, and possibly, the valuation too. Son has $1.5 billion riding on OYO.
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Meanwhile, the other big Paytm has seen a spike in valuation in the last three years but the road ahead is fraught with risks as it goes to head-to-head against the combined might of Reliance Jio and Facebook ⁠— owned by two of the world’s richest men Mukesh Ambani and Mark Zuckerberg respectively⁠— in payments, retail and more, areas that Paytm has called itself a leader in.

The future of ride-hailing services like Ola in the post-COVID world with a rising preference for work-from-home is just as uncertain.Softbank’s investment gave Grofers another lease of life but in reality, online delivery of essentials is an overcrowded space with everyone from BigBasket to Amazon to Flipkart fighting it out.

SoftBank itself poured in $5 billion into the second vision fund (SVF2) with a total reported size of $108 billion. Indian eyewear company Lenskart became the first company in India to receive funds from SVF2 in December 2019, just months before the world went into recession.
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According to a Reuters report, the group said it sees a $16.5 billion loss for its $100 billion Vision Fund. Thi was the first time in 15 years Softbank posted a loss because of ‘the deteriorating performance of its tech bets’. The group as a whole is set to report a $12.5 billion loss in FY20.

SoftBank announced its largest ever share buyback to prop up their value in March. Son has already pledged two of every five shares in Softbank as collateral for loans.

So it’s hardly a surprise that Son is having second thoughts on his own ‘vision’. "I promise you I'll start to be more careful and listen. My view doesn't change, but my behavior becomes a little more careful,” he reportedly told his investors in the US.
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SEE ALSO:
OYO turns to Masayoshi Son for help in Japan, but SoftBank itself is struggling
Chalk and cheese: When Steve Schwarzman first met Masayoshi Son
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