SoftBank eagerly abide as four of its portfolio companies prepare for IPOs

India IPO

Updated July 29, 2024

At least four of SoftBank's portfolio companies are preparing to go public this year.

At present IPO valuations, SoftBank's investments in Ola Electric and Firstcry are poised to yield $1 billion each, factoring in partial exits. However, the final value will fluctuate based on post-IPO stock performance.

SoftBank eagerly abide as four of its portfolio companies prepare for IPOs

IPO Plans for SoftBank's Portfolio Companies

SoftBank Investment Advisors, a Japanese tech investment firm, is poised for significant returns from the Indian market as four of its portfolio companies gear up for IPOs this year. According to two sources, Ola Electric Mobility and Firstcry are expected to go public in early and mid-August, respectively. Unicommerce and Swiggy are also slated for IPOs, with Unicommerce targeting mid-August and Swiggy planning its IPO around Diwali.

Details on IPO Structures and SoftBank’s Stakes

Ola Electric Mobility's IPO will involve a fresh issue of shares worth ₹5,500 crore and an offer-for-sale (OFS) of 84.9 million shares. SoftBank, holding a 21.98% stake, plans to sell 23.8 million shares as part of the OFS, aiming to value the company at $4.5-5 billion. SoftBank's initial investment in Ola Electric in 2019 was $250 million at a unicorn valuation, likely yielding over 3x returns.

Similarly, SoftBank, which invested $300 million in Firstcry in 2020, holds a 25% stake after selling shares worth $320 million. The DRHP indicates that SoftBank will sell one-sixth of its stake (20.32 million shares) in the IPO, potentially earning $150-180 million. Firstcry's valuation at $4 billion suggests that SoftBank's gains from part exits and the current stake are around $1 billion each for both Ola Electric and Firstcry.

SoftBank's Exit Strategy and Market Impact

SoftBank's disciplined exit strategy has resulted in substantial risk-adjusted returns from its Indian investments. The fair value of SoftBank's Indian portfolio peaked at nearly $14 billion by December 2023. Managing Partner Sumer Juneja noted that SoftBank has secured over $5.5 billion in exits from its Indian investments since 2018, with notable exits from Lenskart, Firstcry, Paytm, Zomato, Delhivery, and Policybazaar.

Recent exits include ₹3,115 crore from Zomato and ₹1,690 crore from Delhivery, with the firm exiting Paytm as well. Overall, SoftBank has returned $6.6 billion from $11 billion invested via the Vision Fund in India.

Upcoming Tech IPO Wave

Following the 2021 IPOs of Paytm, Nykaa, and Zomato, more SaaS and consumer tech firms have gone public, including Mapmygain, RateGain, Zaggle, and Mamaearth. Abhishek Bhagat from JM Financial expects 20-25 more internet and tech companies to seek IPOs in the next two years, potentially altering the composition of the Nifty50 index. Currently, tech-related segments hold significant weight in global indices like the S&P 500, a trend expected to reflect in India soon.

Future SoftBank-Backed IPOs

SoftBank’s other potential IPO candidates include unicorns Flipkart, OfBusiness, and Lenskart, with Oyo also planning a public listing. SoftBank’s portfolio also includes prominent companies like Polygon, ElasticRun, Juspay, Cars24, Meesho, MindTickle, Whatfix, Zeta, Unacademy, and Eruditus, indicating a robust pipeline of future IPOs.