When Flipkart’s deal to acquire Snapdeal fell through earlier this month, one of the biggest setbacks was for SoftBank.
The Japanese conglomerate has been investing in India for years, attempting to recreate the huge returns it saw after investing in China’s Alibaba early on. It saw potential in Snapdeal and became its biggest backer, but amidst the Indian startup’s declining revenues this year, SoftBank pushed hard for a sale. Many thought the choice to merge with Flipkart was really a way for SoftBank to pursue a stake in the company.
Well, SoftBank still got its way. It just announced a $2.5 billion investment in Flipkart, the largest ever in India’s internet space. While the Japanese conglomerate is now the most dominant player in India’s startup scene, the road hasn’t been smooth.
Investments in India
Along with Snapdeal, Softbank has invested in ride sharing app Ola, hotel room aggregator OYO Rooms, messaging app Hike Messenger and on-demand grocery delivery platform Grofers. The company has also backed online real estate player Housing, which was sold to NewsCorp-owned PropTiger. SoftBank also has a joint venture with Bharti for investments in solar energy in India.
This year, it also corrected two investments mistakes from 2014. SoftBank had the chance then to invest in both Flipkart and Paytm, but it chose to put its money behind Snapdeal instead. This May, it invested $1.4 billion in Paytm and as noted earlier, SoftBank got its hand in India’s e-commerce leader Flipkart.
Snapdeal starting running into issues this year when its valuation plummeted to about $1 billion from a peak of $6.5 billion in January 2016, when the company raised round of $200 million from the Ontario Teachers’ Pension Plan.
Jasper Infotech, the parent of online marketplace Snapdeal, has seen its losses more than double to $464 million (Rs 2,960 crore) for the fiscal year ending March 31, 2016 compared to more than $203 million (Rs 1,319 crore) in the previous year, according to regulatory filings sourced from a business research platform Tofler; Snapdeal has also found it difficult to raise additional funds that were required for its growth and survival.
Ola, another Indian company in SoftBank’s portfolio, has also seen its valuation drop from close to $5 billion in 2015 to $3 billion during the latest fund raising rounds in November 2016. Softbank was forced to lead that round after Ola struggled to attract new investors on its terms. It also had to do the same for hotel startup Oyo.
Successful mergers and acquisitions
But though a significant number of its Indian investments have not worked as expected, SoftBank has had success in scouting and executing mergers with other competing firms.
One of its online real estate portfolio firms, Housing.com was sold in an all-stock deal to rival PropTiger for about $70-75 million in January, at a price that was less than the capital ($90 million) Housing had raised in late 2014. This deal created India’s biggest online real estate startup, valuing the combined entity at about $250 million.
Also online grocer BigBasket, run by Supermarket Grocery Services, and Grofers have initiated talks for a merger that, if consummated, will see SoftBank, which has already invested in the latter, participate in a $60-100 million funding round in the merged entity.
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