“I believe Paytm should grow significantly… and valuation-wise. Of course, it depends on market conditions and investors’ appetite,” Son told reporters after announcing SoftBank’s earnings on Monday. “Either way, I believe the valuation (of Paytm during IPO) should be bigger than the cost that we spent when we made an investment (in the company). So, for us, the IPO should be a great event.”
He had been asked if Paytm’s IPO valuation of around $20 billion was less than expected, and what he thought about the company’s potential to increase this after the IPO.
SoftBank had first invested in Paytm parent One97 Communications in 2017 after which the payments firm was valued at $7-8 billion. SoftBank invested about $1.4 billion in Paytm through a mix of primary and secondary share sales four years ago.
“I believe they (Paytm) can grow their value going forward (after the IPO)… not only Paytm but there are other businesses that we have high expectations of,” Son said, adding that the number of IPOs from its portfolio has been increasing. SoftBank owns 18.5% in Noida-based Paytm, according to the latest red herring prospectus of the payments firm.
SoftBank will sell shares worth Rs 1,689 crore as part of the Rs 10,000 crore offer for sale (OFS) in Paytm’s IPO, which closes on November 10. Paytm’s last private valuation was $16 billion, when it raised $1 billion in funding in late 2019. While initial estimates had suggested a valuation of more than $25 billion for Paytm in its IPO, the company settled for $19.5-20 billion when it announced the price band for the share sale recently. Paytm founder and CEO Vijay Shekhar Sharma told ET that the pricing was fair and rational even though it had the option to pick a higher valuation.
Son’s comments came as the influential tech investor has been perhaps at its most aggressive on dealmaking in India, minting unicorns like Meesho, Zeta, OfBusiness and others, besides portfolio firms such as Paytm, Delhivery, Oyo Hotels & Homes and Policybazaar going public this financial year.
ETtechIn June,
SoftBank Vision Fund CEO Rajeev Misra had told ET that the fund had invested $2 billion in the first five months in India, including deals that weren’t announced at the time. In August, SoftBank re-entered ecommerce major Flipkart by investing in it as part of a $3.6 billion funding round.
Last week, Paytm
raised Rs 8,235 crore from anchor investors, or about 45% of the Rs 18,300 crore it is seeking to raise in total from the IPO. Top sovereign wealth funds and financial investors such as Singapore’s GIC, Canada’s CPPIB, BlackRock, Alkeon Capital, and Abu Dhabi Investment Authority are among those that picked up stakes in Paytm’s anchor round that was oversubscribed 10 times.
ETtechVision Fund 2: Smaller Cheques
Son said investment per deal in its record $100 billion Vision Fund 1, which is backed by the Saudi government, was bigger than Vision Fund 2, which is fully backed by SoftBank Group with no external investor. In a presentation, SoftBank showed average investment per company through Vision Fund 1 was around $943 million as of September and the same for Vision Fund 2 was $192 million. Vision Fund 2 has a corpus of $40 billion.
“Ticket size per deal is one fifth of Vision Fund 1 in case of Vision Fund 2,” Son said. “So, for investments, rather than making a big swing, we would like to make it more robust and also allocate in a diverse way.”
ETtechThis, according to Son, also resulted in relatively smaller ownership in companies through Vision Fund 2 compared with the first one—in the teens compared with about 20% stake in a company through Vision Fund 1.
“So, our ownership stake per company has been smaller… but at the same time the number of deals has increased compared to Vision Fund 1. So, in total, the amount of the investment is about the same or bigger compared to Vision Fund 1,” he said.
Son added that taking a stake of 20-30% in a company was also “expensive” as other shareholders don’t want to dilute too significant a part of their holding.
According to Monday’s presentation, the Vision Fund unit accounted for 44% of SoftBank Group’s net asset value at the end of September quarter compared with 16% in the same period a year ago. This is also due to a significant loss in Alibaba’s share value due to the regulatory crackdown and antitrust probes by the Chinese government.
Son said he was “not proud” of the performance of the Vision Fund unit during the quarter as it recorded more than $7 billion in losses during the September quarter, largely due to the loss in value of publicly traded firms such as South Korean ecommerce firm Coupang and Chinese cab-hailing firm Didi.
Overall, the SoftBank Group
reported a loss of $3.5 billion during the quarter. Son described the situation as being in the middle of a “blizzard,” mainly due to the Chinese portfolio. But he’s hopeful that the group can double the number of “golden eggs” next year, referring to companies going public or allowing an exit.
“This year, in only six months, we have already seen 18 companies (going public through IPOs and SPACs),” he said.
SoftBank Group also announced a share buyback of close to $9 billion.
