SoftBank Posts 49% Uptick In Q1 Operating Profit From Flipkart Stake Sale

Japanese technology conglomerate SoftBank Group Corp posted a 49% increase in first-quarter operating profit. The profit of $2.2 Bn (¥244.9 Bn) for its $100 Bn SoftBank Vision Fund came from the gains of its stake sale in Flipkart to Walmart.

For the quarter ended June 30, the Tokyo-headquartered company posted an operating profit of $6.42 Bn (¥715 Bn), compared to $4.30 Bn (¥479 Bn) in the same period in the previous year.

SoftBank said it expects the sale value of its Flipkart shares (representing 19.95% of Flipkart shares on a fully diluted basis) to be approximately $4 Bn. SoftBank also said it expects to pay a deferred tax of $645K (¥71,746 Mn) on this gain.

The Flipkart stake sale represents a milestone for the SoftBank Vision Fund because it is the first instance of  monetisation of an investment made under it.

“The Company estimates that the sale of Flipkart shares will occur within 24 months of the inception of the investment and has calculated the deferred tax at 43.68%, being the Indian short-term capital gains tax rate expected to apply to the sale of Flipkart shares,” it stated in its consolidated financial report for the first quarter ended June 30th.

SoftBank Increasing Its Bets In India

SoftBank is said to be mulling a $5 Bn Asia fund, with a major focus on India, half of which is expected to be invested in the country.

Last month, reports surfaced that Kabir Misra, managing partner at SoftBank Capital, was looking to launch his own startup fund with a corpus of $250 Mn and that the fund would also count SoftBank Group as an anchor limited partner.

In May, in the biggest M&A deal seen in Indian ecommerce segment, Walmart bought about 77% in Flipkart for $16 Bn, opening up a new front in the battle with Amazon to be the leader of what is the most lucrative ecommerce market in the world.

Soon after Flipkart deal, SoftBank’s more than $200 Mn investment in Gurugram-based online insurance startup PolicyBazaar led the startup to the Unicorn club.

As SoftBank exits Flipkart, it is also planning to invest in its portfolio company Paytm’s ecommerce unit i.e. Paytm Mall. Inc42 had reported earlier that an initial round of discussions to invest as much as $3 Bn in Paytm Mall.

SoftBank has already invested $8 Bn out of the $10 Bn in the Indian ecommerce and internet market in the last five years after setting a target to invest in India by 2024 and going by the rewards it has reaped, it will surely be looking to up its investment a notch after previously slowing down because of write-offs in some of its initial investments like Snapdeal and Housing.com.

Reports have already emerged as to how the Japanese conglomerate plans to invest between $60 Bn -100 Bn in a solar power project in India and how it will partner with Paytm to create a mobile payment service in Japan by year-end.

Expect SoftBank to go hard on the Indian markets in the times to come.