Funding at a glance: SoftBank expects a bonanza from seven Indian start-ups

The value of its Chinese investments might have plummeted due to Beijing tightening control of companies like Alibaba, TikTok or Didi where it has substantial exposure but Soft­Bank’s value of its investments in India are expected to go up, thanks to seven start-ups going for an IPO in the next 12- 24 months.

Based on estimates, Soft­Bank has collectively invested over $4.7 billion in these seven start-ups. However, the collective valuations, based on estimates by merchant bankers involved in the process expe­cted during the IPO s is a staggering $48.5 to $56.5 billion.

The start-ups include Paytm (which has filed its red herring prospectus), InMobi (in the US by end of this year), online hotel chain Oyo (sometime next year), Delhivery (exp­ected to file its red herring in the last quarter of this year and the issue likely next January), Ola, Swiggy, and Policy Bazaar.

And this does not include the possibility of Flipkart also going public and SoftBank is back again (it has invested $600 million) as one of its inve­stors when Flipkart raised $3.6 billion, increasing the its valuation to $38 billion. SoftBank’s total investment through the various fund, as well on its own in India, is $17 billion, out of which $11 billion has been invested in the last four years.

It was in 2013 that SoftBank invested $250 million for the first time — in the ad tech on­line platform InMobi which helped the company to become the country’s first unicorn.

InMobi went through various challenges, forcing Soft­bank to reduce its valuation on its books few years ago. But it is back in the saddle and is now going for a US listing. The valuation is expected to be around $5-6 billion. A pre-IPO placement is also expected. In its latest financial report, Softbank also declared that it realized a gain on investments of yen 57,906 million (Rs 3,900 crore) associated with the sale of InMobi shares from Soft­bank to the Softbank Vision Fund 2. 

SoftBank has invested $1.6 billion in Paytm and this firm too has already filed a red herring prospectus and is expected to come up with an IPO of over Rs 16,600 crore with­in this year. Sotfbank has a 19 per cent sta­ke in One 97 Com­mu­ni­cat­i­ons, which controls Paytm.

Based on its last fund raise, the company’s valuation was around $15.3 billion but merchant bankers say it could hit anything between $15-20 billion during the IPO. It is also bel­ieved that Softbank will of­fer some percentage of its holding for an offer of sale. 

SoftBank CEO Masayoshi Son once saw hotel chain Oyo as the jewel in his crown. He has invested around $1.2 billion and has a 46 per cent stake) and has faced serious challenges over aggressive growth and a debacle in China with burgeoning losses and hotel partners leaving in hordes.

These developments have hit the firm’s bottom line and valuation. It is believed that Soft­bank drew down its valua­tion substantially from $9 billion to $ 4-5 billion, say sources. The pandemic of course exacerbated matters with hotels closing all over the world.

Yet Oyo has revamped its bu­siness model to make it capex light. It has withdrawn from putting in capex in hotels which it managed. These acco­unted for 15 per cent of the properties. Based on reports of its discussions with Microsoft, Oyo is looking at raising more money which will put its valuation back to the earlier levels. It too is looking at an IPO next year of $1.2 to 1.5 billion.

In Swiggy, SoftBank entered the sector a bit late, putting in $450 million last year as part of the food delivery chain’s total fund raise of $1.25 billion. This has taken the valuation of the company to $5.5 billion. Son says that he is hopeful that it will give them ‘a good return’ when it is listed.  

While no date of an IPO has been announced, merchant bankers expect Swiggy to be looking at a large time span of around 24 months. There are others in the game too. Ola has seen its valuations being brou­ght down by one of its investors, the Vanguard group, in March to half of the earlier $6 billion owing to the lockdowns affecting business. But just a month ago Ola raised $500 million from Temasek and Plum­wood Investments through a secondary share sale which will help in pushing up its valuation before an IPO. 

Delhivery, in which Soft­Bank has invested $400 million, is expected to submit its red herring prospectus in the last quarter of this year and go for the IPO early next year.   

Analysts say with Soft­Bank deciding to hold back new in­vestments in China, this could be good news for Indian start-ups as they offer (after China) am­ong the best valu­ation inc­reases, especially as they are now larger than ever.