Japan's SoftBank picking stock winners in India's red-hot IPO market

By Dave Sebastian and Min Jeong Lee

India’s hot market for share sales is delivering wins for Japanese technology investor SoftBank Group Corp., whose own stock has taken a hit from disappointing earnings and a reality check on artificial intelligence.

Three firms backed by SoftBank have made solid Mumbai debuts in the past week. Shares of e-scooter maker Ola Electric Mobility Ltd., the biggest of the initial public offerings, have surged more than 60 per cent. Software maker Unicommerce eSolutions Ltd.’s shares are already up more than 80 per cent while baby-products retailer Brainbees Solutions Ltd.’s have gained about 40 per cent.

Further successful IPOs may add funds for Chief Executive Masayoshi Son’s planned large-scale push into AI and semiconductors. The company has built an enormous cash pile, while the value of its assets has soared along with the share price of its chip affiliate Arm Holdings Plc.

“You’ll start seeing a lot more IPOs globally from our fund, the same way you’ve seen that from India,” Alex Clavel, co-chief executive of SoftBank Investment Advisers, said in an interview. “We might have sold a little bit in those IPOs, but we’re very fully invested in those companies,” he added.  

The Vision Fund has been playing an active role in helping Son scope out deals in preparation for SoftBank’s next chapter. “We’ll be evolving as technology evolves,” Clevel said. “The intention is that our people internationally are working on fund transactions as well as SoftBank Group transactions to support the mothership.”

The Indian IPOs are a positive sign after the Vision Fund segment fell to a loss of ¥204.3 billion ($1.4 billion) in the June quarter, weighed down by writedowns on a portfolio of young, loss-making technology companies. It also provides relief after SoftBank’s previous disappointments in India on bets in payments company Paytm and logistics provider Delhivery Ltd.

SoftBank’s shares have recovered this week but remain 30 per cent down from their July all-time high after the company’s latest results and the broad market selloff. Investor optimism over AI and chips is showing signs of strain after driving up shares of Arm and its parent.

The Tokyo-based investment firm made a total of $155 million by selling some shares in the three recent Indian offerings, according to Bloomberg calculations based on company disclosures. While required lockups mean it will take time for SoftBank firm to reap further gains on the shares it still holds, the investments are off to a strong start.

India’s market is bustling with big debuts. Ola raised about $733 million in what was the nation’s largest IPO in about two years, and investors are eyeing the planned record $3.5 billion listing of Hyundai Motor Co.’s local unit in the coming months.

SoftBank portfolio companies preparing IPOs include food-delivery app Swiggy Ltd., which has filed a draft offer document with India’s market regulator. The Vision Fund is also backing Oyo Hotels’ parent company Oravel Stays Ltd., though its plan for a Mumbai listing has been facing setbacks.