Around half the value of the mark-downs is due to the Japanese currency's appreciation against other currencies.
Japanese investor SoftBank has marked down the value of two of its largest Indian start-up investments Ola and Snapdeal. SoftBank has written off around $550 million in the value of shares in its investments in India, which include ANI Technologies, owns India’s largest cab aggregator Ola, and Jasper Infotech, which runs e-commerce marketplace Snapdeal.
Around half the value of the mark-downs is due to the Japanese currency’s appreciation against other currencies.
In its consolidated earnings for the six months ended September, SoftBank reported a loss of 58,140 million Japanese yen ($557 million) from financial assets at fair value, mainly due to its investments in India. Of this, 29,622 million Japanese yen ($284 million) was recorded as a loss due to the year-on-year appreciation of the yen.
“Gain or loss arising from financial instruments at FVTPL comprises mainly changes in fair value of preferred stock investment including embedded derivatives, such as ANI Technologies Pvt Ltd and Jasper Infotech Private Limited in India, designated as financial assets at FVTPL (fair value through profit or loss),” said the company in its filings.
SoftBank led a $210-million investment in Ola and $627 million in Snapdeal in October 2014. It has also made follow-on investments in both firms.
The markdown in Ola’s value comes at a time when the company is struggling to raise fresh funds of as much as $1 billion to take on global rival Uber. Recent reports said the firm was looking to raise $600 million from investors, which include SoftBank.
While Ola continues to lead the Indian market, in a span of three short years Uber has been able to catch up and with its deep pockets is challenging the Indian firm’s leadership.
To Ola’s dismay, after Uber lost to Didi Chuxing in China, it has stepped up its focus on winning India and has pledged to invest a substantial portion of the $3.5 billion it raised from Saudi Arabia's Public Investment Fund in June. Ola’s valuation had peaked at $5 billion.
Snapdeal’s value, too, has eroded due to global competition from Amazon, which has overtaken it as the second largest e-commerce marketplace in India. The company was valued at $6.5 billion when it raised $200 million led by Canada’s Ontario Teachers’ Pension Plan in February this year.
Early this year, e-commerce market leader Flipkart, too, suffered a similar fate when investors such as Morgan Stanley, T Rowe Price, Valic, Vanguard and Fidelity marked down the value of their stake in the company by nearly a third. The company’s value fell from a peak of $15.2 billion to $9-11 billion.
It is not possible to ascertain the exact value of both Ola and Snapdeal after the mark-down by SoftBank since the firm did not break out individual details of the drop in fair value of its investments in the two companies.
SoftBank has so far invested close to $2 billion in India, with chief executive Masayoshi Son telling the media in May that the company’s investment could exceed $10 billion over the next 5-10 years.