SoftBank's India losses at $1.4 billion on Ola, Snapdeal

13 May, 2017, 10:52 | Author: Valerie Burke
  • Vanguard joins Soft Bank in lowering Ola’s valuation

The potential merger between Indian e-commerce companies Flipkart and Snapdeal continues to hang in the balance with a crucial board meeting of Snapdeal ending inconclusively. But things may change now, said analysts.

Betting heavily on the growing e-commerce sector in India, SoftBank invested about $900 million in Snapdeal. "This situation caused a material decrease in net asset value of Starfish Investments".

Nonetheless, it seems to have drawn up three options for Snapdeal- merge with Flipkart, combine with Paytm or a writedown of Softbank's investment to zero.

Locked in an intense battle with Tiger Global-backed Flipkart and American e-tailing giant Amazon, Snapdeal has not been able to match the success of its rivals, slipping to a distant third in the e-commerce market.

Analysts estimate that while Flipkart has an annualised gross merchandise value (GMV) run rate of $6 billion and Amazon $4.8 billion, based on sales during the month of March 2017, Snapdeal's GMV will be much lower at just $1-1.5 billion.

If the sale materialises, it would mark a deal ahead of rumoured acquisition of Snapdeal by bigger rival Flipkart. According to the filings with the registrar of companies (RoC), Snapdeal had Rs 1,072.2 crore as cash and bank balances as on March 31, 2016.

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SoftBank, the largest shareholder in Snapdeal, had earlier secured the go-ahead from the founders and another investor, Kalaari, but the matter was stuck as Nexus was not in agreement with the valuation suggested, which according to sources has now been resolved.

SoftBank is known to be one of the most prolific, high-profile investors in the Indian startup ecosystem.

SoftBank Group Corp (SBG) registered loss from financial instruments at FVTPL (fair value through profit or loss) of Japanese yen 160,419 million in consolidated financial statements for the fiscal year ended March 2017, SoftBank said in a statement. These include e-commerce major Snapdeal and cab aggregator Ola.

Valued at $6 billion mid of past year, the company has been going through very challenging times since the last 8-10 months as it could not raise funds. In the nine months that ended December 2016, SoftBank had written off around $475-million from its investments in the two companies, making the final quarter markdown the harshest. On the other hand, Ola, which rivals Uber Technologies Inc, has managed to raise only about $350 million after hitting a fundraising trail in June a year ago, with SoftBank alone putting in about $250 million.

The fair value of Snapdeal and Ola's stocks fell drastically between March 2016 and March 2017.

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