SoftBank posts $7.7 billion profit on India’s IPO market boom, rebound in tech valuations

SoftBank Group Corp. swung to a quarterly profit on a series of successful Indian listings and a rebound in tech valuations that boosted the Vision Fund portfolio. 

The Tokyo-based company earned a net income of ¥1.18 trillion ($7.7 billion) in the September quarter, compared with a net loss of ¥931 billion last year. Analysts projected on average a net income of about ¥295 billion for the period. The Vision Fund reported a gain of ¥373 billion, thanks to strong initial public offerings for Indian startups and valuation gains in Coupang Inc. and Didi Global Inc. 

A boom in India’s IPO market is buoying the Vision Fund, which for years struggled to win returns commensurate with its $100 billion-plus scale. Seven years since the investment unit’s launch, it’s reaping gains from the debuts of startups such as e-scooter maker Ola Electric Mobility Ltd. and online retailer Brainbees Solutions Ltd., which sells baby products under the brand name FirstCry. The SoftBank-backed food-delivery app Swiggy Ltd.’s imminent $1.3 billion IPO was subscribed more than three times. 

SoftBank is seeing a “harvest season in India,” Devi Subhakesan, an independent analyst from Investory Pte who publishes on SmartKarma, wrote in a note prior to the earnings release. She estimates SoftBank’s stake in Swiggy to be valued at around $803 million based on the IPO price, representing a 78% rise from its investment in January 2022. 

It’s a rare moment of victory for the Vision Fund, which posted two straight years of hefty losses after startup valuations collapsed, erasing its previous gains. It swung to a mild profit in fiscal 2023, but has had to scale back new investments. 

The positive earnings come as founder Masayoshi Son gears up for his next big gamble on the future of artificial intelligence.

SoftBank and the Vision Fund have also adopted a more targeted approach toward investing that focuses on generative AI. Their latest bets include OpenAI and Perplexity AI Inc. 

“Roughly half of the second-quarter gain comes from surfacing upside from Indian IPOs,” said Kirk Boodry, an analyst with Astris Advisory. “If the IPO pipeline in the US reopens and VF companies are in demand, there could be a mini-boom. But what they plan to do with AI is probably more important.”

Shares of SoftBank have risen and fallen with investors’ shifting sentiment about AI’s ability to meaningfully improve people’s lives. The stock tumbled after hitting a record high in July, but has since regained some ground.