SoftBank sinks $1.4-bn into Ola, Snapdeal
11 May 2017
Japanese internet giant SoftBank has written down $1.4 billion of its investments in Indian e-commerce venture Snapdeal and cab aggregator Ola after the two lost heavily in price discounts in a bid to drive business in a competitive market.
''Loss on financial instruments at FVTPL (fair value through profit and loss) was ¥160,419 million ($1.4 billion) compared to a gain of ¥114,377 million ($1.1 billion) in the previous fiscal year,'' SoftBank group corp (SBG) said in an earnings report for the fiscal ended 31 March.
''Highly competitive e-commerce market in India has made a trend of the company's business performance lower than initially anticipated. This situation caused a material decrease in net asset value of Starfish Pte Ltd (holding company of Snapdeal) and, therefore, SBG impaired the carrying amount of its shares in the company, to the amount equivalent to its net asset value,'' it said in its financial report.
SoftBank had earlier this year announced the writedown of $555 million investments in Snapdeal and Ola for the six months ended 30 September 2016.
While Snapdeal, founded by Kunal Bahl and Rohit Bahl in 2011, lost out to local competitor Flipkart and multinational Amazon, Ola, which runs the largest network of taxis in the country, is still fighting a major battle with US start-up Uber.
Snapdeal, one of the early Indian start-ups, was the second-largest e-commerce marketplace in India and was valued at $6 billion till the middle of last year.
The company has been going through very challenging times since the last 8-10 months as it could not raise funds. It also laid off a number of employees early this year in a bid to cut costs and improve margins.
Although the company was able to grow its revenues from Rs76 crore in 2011 to Rs1,457 crore in 2016, its losses widened to Rs2,960 crore in March 2016.
While Snapdeal's 2017 financials are yet to be disclosed, reports pointed to a possible merger between Snapdeal and Flipkart brokered by SoftBank.
Similarly, Ola, which runs the largest network of taxis in the country, saw its losses widening to Rs2,311 crore in fiscal year 2016. According to its financial report, the losses have grown due to its high marketing and ad spends.