On Tuesday, Japanese SoftBank Group‘s Vision Fund unit published its first-quarter profit. The unit reported 236 billion yen for Q1, the equivalent of $2.14 billion, seeing gains of 391.5 billion yen. The gains were largely represented by the 358 billion yen and 285 billion yen valuation gains recorded by Didi and DoorDash, respectively. Executives pointed to further upside from Vision Fund investments such as Chinese ride-hailing firm Didi Global Inc and “Uber for trucks” startup; Full Truck Alliance Co Ltd. The reveal came after gains from listing portfolio companies were offset by falling shares in firms.
First-quarter group net profit fell 39 percent year-over-year to 762 billion yen. This occurred despite the company reporting almost ¥1.48 trillion in net sales for the quarter, which is up 15.6 percent from the same period last year.
The dip in net income was attributed to the 42 percent increase in taxes and China’s crackdown on the dominant tech companies in the country. The valuation of SoftBank’s largest asset; a stake in Chinese e-commerce giant Alibaba Group Holding Ltd, was hammered by Chinese regulatory actions. SoftBank faced higher expenses after Alibaba was fined 18.2 billion yuan by China’s State Administration for Market Regulation in April. During the April-to-June quarter, Alibaba also saw its investment value drop because of impacts from the pandemic, which also contributed to SoftBank’s retrogressive net income.
The net income of SoftBank’s various segments consisted of 271 billion yen from Japanese telco SoftBank Corporation, 235.5 billion yen from its pair of Vision Funds, 625.7 billion yen from its holding companies segment, and almost 8.8 billion yen from Arm.
While the actions of Chinese regulators have impinged on the company’s return expectations, its broader thesis in China remains unchanged; “it is still a large, growing and compelling economic opportunity,” Navneet Govil, Vision Fund Chief Financial Officer, said.
The shares of SoftBank Group have slipped a third from two-decade highs in March, amid the completion of a record 2.5 trillion yen buyback. Shares closed up 0.9% ahead of earnings. The shift has thrown a wet blanket on SoftBank’s investing in China, which makes up about a quarter of its funds’ portfolio. “Until the situation is clearer we want to wait and see,” Masayoshi Son, Chief Executive Officer of SoftBank, said.
More than two-thirds of the portfolio of the first $100 billion Vision Fund is listed or exited. SoftBank has distributed $27 billion to its limited partners since its inception. “Having a large public portfolio introduces volatility but at the same time it allows us to continue to monetize in a very disciplined manner,” Navneet Govil said. He added that further upside will come from listings by Indian payments firm Paytm and insurance aggregator Policybazaar, as well as Singapore-based ride hailer company Grab.
SoftBank is bolstering its investment through Vision Fund 2, to which it has committed $40 billion of capital, with the unit making 47 new investments worth $14.2 billion in the April-June quarter alone.
SoftBank has also been betting on publicly listed shares through its SB Northstar trading unit. It held stakes in firms worth $13.6 billion at the end of June with the portfolio no longer including Microsoft Corp or Facebook Inc, which were listed three months earlier.
Headquartered in Minato, Tokyo, the Japanese multinational conglomerate holding company has made numerous investments in companies with operations centered on technology, energy, and finance, and its Vision Fund remains the world’s largest technology-focused venture capital fund.