Bengaluru: SoftBank, the Japanese conglomerate led by Masayoshi Son, recorded an increase of around $1.48 billion (¥ 164.25 billion) in the fair value of its stake in Flipkart. This profit recorded is the 60 per cent return on its investment in Flipkart done by SoftBank in Flipkart.
The balance sheet showed the profit prior to the closure of the deal which SoftBank signed with Walmart to sell its 19.95 per cent stake in Flipkart for around $4 billion to the retail giant.
Apart from this, the Japanese conglomerate has also set aside around $648 million (¥71.75 billion) which it had to pay to the Indian government as short-term capital gains tax. This includes 43.68 per cent of its total profit from the Flipkart exit as the sale would happen within 24 months of its initial investment. Notably, $2.5 billion was invested by SoftBank in the Flipkart in August 2017.
The consolidated financial report for the April-June quarter of SoftBank said, “The increase in the fair value of Flipkart was recognised to reflect the expected sales value of approximately $4 billion pursuant to the agreement SoftBank Vision Fund entered into on May 9, 2018, to sell all of its shares to Walmart.”
49 per cent uproar was recorded in the operating of SoftBank for the first quarter. The operating profit came out to be $6.45 billion (¥715 billion) whereas last year it was $4.32 billion (¥479 billion). It should be noted that out of $6.45 billion operating profit, $2.21 billion was driven by the increase in the valuation of Flipkart.
It was expected that the Japanese conglomerate might put off selling its stake in Flipkart till the end of the investment period of two-year so as to avoid paying short-term capital gains tax but the financial report of the company clarified the plans.
It is also said that SoftBank played an important role in defining the terms of investment for Walmart in Flipkart being the largest investor in the e-commerce company. It also pushed for a valuation of $20 billion in the secondary market.
It is also said that the Japanese conglomerate was also the part of the grouping that invited bidding from Amazon for the acquisition of Flipkart in competition to the Walmart. Though SoftBank is known for long-term investment and it was not willing to withdraw from the investment but at the same time, it was not comfortable to be part of it as a secondary investor as Walmart would be the lead investor.
Finally, the firm decided to exit its investment completely after being assured that Walmart would buy its entire stake in Flipkart for around $4 billion.
The profit which SoftBank would get from selling its stake in e-commerce company will up to some extent make up for the amount it faced when it wrote off its entire investment in Snapdeal last year. It is important to note that the Japanese conglomerate tried to organize Snapdeal and Flipkart merger too but the deal fell through leading to the company’s independent investment in Flipkart.
The Japanese conglomerate has surfaced as the largest benefactor of the Indian startup ecosystem leaving behind Tiger Global or Naspers. During a meeting with Prime Minister Narendra Modi in October 2014, SoftBank Chief Executive Masayoshi Son had said that India was the topmost priority for him and the company would invest $10 billion in the country by 2024. However, given the current pace of its investment, SoftBank is expected to hit that target much earlier.
SoftBank has not only invested in Flipkart but also in the digital payments giant of the country, Paytm, cab hiring company, Ola, budget hotel room provider, Oyo, InMobi and several others. As per the plans, the investment giant is looking forward to help these companies expand their horizons overseas also. In this line, Oyo has already entered China whereas Paytm is in the process to launch payment services in Japan.