Japanese telecom giant Softbank has written off a substantial portion of its investment in Indian e-commerce marketplace Snapdeal as it pushes to offload the company to larger rival Flipkart.
The company has recognised the valuation of loss of $1 billion (JPY 114,059 million) in the year that ended March 31, 2017 due to the loss on valuation of shares of subsidiaries and associates, including STARFISH I PTE LTD which holds shares in Jasper Infotech Pvt. Ltd, which runs Snapdeal, the firm said in its filings.
"(The) highly competitive e-commerce market in India has made a trend of the company's (Snapdeal's) business performance lower than initially anticipated," the company said in a statement. "This situation caused a material decrease in net asset value of STARFISH I PTE LTD."
Since August 2013, Softbank has invested close to $900 million in Snapdeal which was seen as a prime contender to take on Flipkart and Amazon in India. However, after slipping to a distant third place in India's e-commerce space and losing its share to Amazon, Softbank is now brokering a deal to sell Snapdeal to India's largest marketplace Flipkart.
After convincing Snapdeal's other major investor Kalaari Capital to agree to the sale, the company is said to be close to getting the nod of approval from Nexus Venture Capital as well. The deal would include Softbank spending as much as $1.5 billion to buy a double-digit stake held by US investor Tiger Global in Flipkart.
Apart from writing off nearly $1 billion in the value of Snapdeal, Softbank also wrote off around $400 million in the value of its second largest investment in India Ola. The company reported a loss of $1.4 billion (JPY 160,419 million) from financial instruments at fair value mainly from investments in Ola and Snapdeal.
"This mainly resulted from recording a loss as the amount of changes in the fair value of the financial instruments at FVTPL from March 31, 2016 to March 31, 2017. Financial instruments at FVTPL included preferred shares of Jasper Infotech Private Limited and ANI Technologies Private Limited," the company said in a statement.
In December, Ola raised $350 million from Softbank, RNT Capital and Falcon Edge Capital at a valuation of $3.5 billion. Softbank, which pumped in $250 million brokered the deal at a 30% drop in valuation compared to the previous round, reflecting in the loss the company reported in fair value of its shareholding in Ola.
Besides Ola and Snapdeal, Softbank has investments in OYO Rooms, messaging app Hike Messenger and on-demand grocery delivery platform Grofers. The company had also backed online real estate player Housing, which got sold to NewsCorp-owned PropTiger. Softbank has a joint venture with Bharti for investments in solar energy in India.