SoftBank logs $13 bn FY net loss, will trim tech investment portfolio

'We have to prepare for the worst; be in defence mode,' says Masayoshi Son, company CEO and founder

SoftBank Group, the global technology investor that funds several Indian companies, said on Thursday it made a record loss of over $26 billion at its Vision Fund unit as the value of its portfolio reduced. Masayoshi Son, founder and CEO of SoftBank, said that this year the firm may invest only half or a quarter of what it did last year.

Son’s comment signals a slowdown in large funding rounds globally and in India, caused by macroeconomic factors and the Russia-Ukraine war. SoftBank reported an annual net loss of $13.12 billion.

“Nobody knows what happens tomorrow in this kind of market. So we have to prepare for the worst. I want to put ourselves into the defence mode and pile up lots of cash in hand. We would be much more careful when we invest new money,” said Son, in a company webcast. “We have lots of proceeds from many of the exits. The world is volatile. Inflation is going on all over the world. So, the interest rate has to go up, which puts pressure on depression to the market for the share price,” said Son.

SoftBank said there are growing concerns of a global economic slowdown as energy prices have surged in the wake of economic sanctions against Russia following its invasion of Ukraine, combined with the onset of monetary tightening in the U.S. to curb inflation. There are also continued supply chain disruptions due to the Covid-19 pandemic. These macroeconomic headwinds have led to increased global stock market volatility, which has adversely affected the value of the Company's equity holdings and NAV (net asset value, calculated as equity value of holdings – adjusted net interest-bearing debt).

The company said it remains committed to ensuring liquidity and diversity in its investment portfolio while adhering to its financial policy of maintaining a prudent LTV (loan-to-value)  and cash position. Like many other international funds, SoftBank Vision Funds and Latin America Funds are not immune to changes in the external environment, hence they continue to carefully construct and manage their investment portfolios by closely monitoring the market and placing emphasis on assessing the fundamentals of the investees.

In India, SoftBank has backed many companies and unicorns or startups with over $1 billion in valuation. These include Paytm, Oyo, Ola, Lenskart, Policybazaar, FirstCry, Meesho, Unacademy, Zeta, Swiggy, Ola Electric and InMobi.

SoftBank’s $1.4 billion investment in Indian fintech firm Paytm, currently has a fair value of around $800 million, resulting in a cumulative valuation loss of $600 million. However, its investment of $100 million in another Indian firm PB Fintech (parent company of PolicyBazaar) has a fair value of around $400 million, resulting in a cumulative valuation gain of $300 million.

SoftBank has reported a total cumulative valuation loss of $9.7 billion in Chinese ride-hailing giant Didi and $2.6 billion in office-sharing firm WeWork.

Last year, food delivery firm Swiggy closed a $1.25-billion fundraise, marking the first investment in the category by SoftBank Vision Fund 2. This took the valuation of the Bengaluru-based startup up by more than 50 per cent to $5.5 billion from $3.6 billion earlier. In September last year, social e-commerce start-up Meesho raised $570 million, led by Fidelity Management & Research Company and B Capital Group, a venture capital firm co-founded by Facebook Co-Founder Eduardo Luiz Saverin and existing investors including SoftBank. In September last year, edtech startup Unacademy became a unicorn after it raised $150 million in a round led by SoftBank valuing it at $1.45 billion, a three-fold jump in just six months.

Last December, Son said that several years ago, when Prime Minister of India Narendra Modi came to Tokyo, he met him there and gave him the biggest commitment that he would invest $5 billion in India. Now after 10 years, Son said SoftBank had already invested $14 billion in India. He said SoftBank is the biggest foreign investor in India. Last year alone, it invested $3 billion into India. “We provide about 10 per cent of the funding of all of the unicorns in India,” Son had said.