There had been murmurs that Flipkart’s valuation mark down will have a ripple effect on companies in India, and it’s finally happened. Snapdeal and Ola have had their investments marked down by Softbank, one of their biggest investors.
Softbank has written off around $550 million in the value of its shares in Snapdeal and Ola.
In its consolidated earnings, Softbank reported a loss of $557 million from financial assets at fair value, mainly due to its investments in India. Of this, $284 million was recorded as a loss due to the year-on-year appreciation of the yen. The other half, was presumably from the loss in value of Softbank’s investments in Snapdeal and Ola.
“Gain or loss arising from financial instruments at FVTPL comprises mainly changes in fair value of preferred stock investment including embedded derivatives, such as ANI Technologies Pvt. Ltd and Jasper Infotech Private Limited in India, designated as financial assets at FVTPL (fair value through profit or loss),” said the company in its filings.
This would mean that Softbank doesn’t value the two companies at the same value at which it had 6 months ago. Ola had last raised money in December 2015 at a near $5 billion valuation; Snapdeal had last raised money in August this year at a near $6 billion valuation.
SoftBank led a $210-million investment in Ola and $627 million in Snapdeal in October 2014. It has also made follow-on investments in both firms. A $550 million write down is significant given these numbers. Softbank, however, did not give a break up of the individual companies in its writedown, so it’s possible that the valuation markdown is more thanks to one company than the other.
This news comes at a bad time for Ola and Snapdeal, who’re both in the market for raising money. A raise at this point might not give them the valuations that they’d commanded the last time, and could result in a down round.
Snapdeal has had a challenging 2016, seeing it largely fall away from the race for the top spot in the Indian e-commerce battle, and settle at 3rd place behind Flipkart and Snapdeal. Ola remains the market leader in the cab hailing market, but Uber, after the sale of its China business to Didi, is focussing even more strongly in India, and has the financial muscle to take on its homegrown competitor.
This year, though, shall certainly be remembered as the year of the correction in startup valuations. Flipkart has seen its valuation being repeatedly marked down by investors, and after the write off in the valuation of Snapdeal and Ola, three of India’s nine unicorns have seen their valuations fall in 2016.