Daily Management Review

Indian Investments Being Reviewed By Softbank Following Wework Valuation Debacle


Indian Investments Being Reviewed By Softbank Following Wework Valuation Debacle
After the debacle faced by the American office renting form WeWork just before the launch of its initial public offering (IPO) because of a substantial fall in valuation compared to what the Japanese investment conglomerate SoftBank had made when it had invested not long ago in the company, the Japanese firm is now reportedly reviewing all of its investments in India because of concerns of valuation mismatch of the unicorns in which it has already invested, claimed reports. 
According to reports quoting sources, a comprehensive valuation and growth report of its portfolio companies in India has been sought by Softbank's global management team.
“The WeWork issue has been kind of a wakeup call. And that’s why the global management has decided to do a risk assessment of sorts and review its investments across the board. With India being a strategic part of its long term strategy, Masayoshi Son and the Softbank global management has decided to do a review over and above the regular quarterly assessment that are conducted for every geography. The idea is to ensure maximized returns from portfolio companies and to stay ahead of the curve in times of market volatility," claimed a report quoting an unnamed source with knowledge of the matter.
"So far Softbank has been looking to invest between $2-$4 billion in India in the coming years. Based on the review, the investment firm may look at marginally scaling down investment in India if need be”, the report added.
Report also said that SoftBank has asked its Indian team to review and submit reports on the progress being made by the important portfolio companies in the country in which the Japanese firm had invested.  The aim of the company in seeking such reports is to identify projects or startups in terms of long term strategic investments and secondary short term investments. Reports also claimed that some of the portfolio companies could even be restructured as well.
"Restructuring portfolio will mean exiting matured investments, closing key deals in the pipeline, looking at key buyout deals and charting out the financial health of companies it wants to hold on to in the long term," said a report quoting a source.
The Japanese investment company could even expand its current investment strategy. For example, the strategy of the company in India to invest the largest part of the over $10 billion investment it has made in India focused completely in privately held companies in the technology and start-up space could be changed as well.
Reports quoting sources have indicated the SoftBank may make broaden its focus area in India in addition to its current focus on investing in start-ups, consumer and technology in the country.
Reports have suggested that the SoftBank management could now shift focus of investing in publicly traded companies in India if such companies align with its strategic aims. There were reports earlier that the Japanese investment firm was in negotiations with Piramal Enterprises of India for a minority stake investment. Additionally, the company is also reviewing possible investment opportunities in other sectors such as real estate, infrastructure and power.
"So far Softbank, like many tech and consumer-focused funds,  has stayed away from the capital intensive sectors like infrastructure, roads and power, Softbank wants to broaden its perspective and play a bigger role in the development of the countries it invests in. While the returns in these sectors may be limited in the near term, Softbank believes that the demand will trigger a massive yield in the long term,” claimed a report citing source information.