SoftBank licks its lips as four portfolio firms head for IPOs

The persons, who spoke on condition of anonymity, said that Ola Electric Mobility, the Bhavish Aggarwal-founded clean mobility company, is expected to see its initial public offering (IPO) open on 2 August; and omnichannel baby products retailer Firstcry is planning to go public in mid-August.

One of the persons added that software business Unicommerce, spun out from Snapdeal, will also go public in mid-August, while food delivery company Swiggy is slated to go public around Diwali.

Softbank did not respond to queries from Mint till press time.

Details of the moves

The Ola Electric Mobility IPO is a combination of fresh issue of shares worth ₹5,500 crore, and an offer-for-sale (OFS) of 84.9 million equity shares. 

The Masayoshi Son run late-stage investor holds around 21.98% stake (810 million shares) in the company. It is looking to sell 23.8 million shares or nearly 3% of its holding in the company as part of the OFS. The public offer is likely to value the company at $4.5-5 billion.

SoftBank first invested in the company in July 2019 with a $250-million cheque at a billion-dollar or unicorn valuation. Five years since, SoftBank is likely to make more than 3x returns on a risk-adjusted basis in the company.

Similarly, SoftBank had first invested $300 million in Firstcry in 2020. Since then, the firm has sold stake worth around $320 million already and currently holds around 25% stake in the company. 

Also read |  Share sale by large investors in Paytm, IIFL and Edelweiss before regulatory rap

As per the draft red herring prospectus (DRHP) filed with the regulator, SoftBank is likely to sell one sixth of its stake (20.32 million shares) as part of the OFS. At a $4-billion valuation, SoftBank will take home almost $150-180 million from the IPO alone. SoftBank came in when Firstcry was valued at $900 million post-money, one of the people cited above said.

To be sure, at current IPO valuations, SoftBank is sitting on gains of $1 billion (including the part exits) each on Ola Electric and Firstcry. The value will change depending on stock movement after their IPOs.

“SoftBank has been a lot more structured and disciplined in terms of exits than most other tech growth investors in India, and it's no surprise that it's reflected in their risk-adjusted returns in India," said Kashyap Chanchani, managing partner and co-founder of The Rainmaker Group, a homegrown investment bank.

The fair value of SoftBank’s India portfolio across its two funds has peaked to almost $14 billion as on 31 December 2023, the company’s earnings release shows.

Also read |  SoftBank exits Paytm at loss of $150 million, offloads remaining 1.4% stake

Also read |  Ola Electric IPO | SoftBank-backed IPO to open for subscription on Aug 2: Report

In an interview with Mint last August, SoftBank India Advisors’ managing partner Sumer Juneja had said that the firm has pulled out over $5.5 billion in exits from its India portfolio since it established its office in Mumbai in November 2018, of which around $1.5 billion was booked between 2022 and 2023. These came from selling partial stakes in companies such as Lenskart and Firstcry, and booking profits from listed companies such as Paytm, Zomato, Delhivery and Policybazaar.

Since then, the firm made around ₹3,115 crore from selling stake in Zomato, and ₹1,690 crore from Delhivery. It has also exited troubled fintech firm Paytm over the past 12 months.

From India, SoftBank has returned at least $6.6 billion so far on the $11 billion of total investments made from the Vision Fund.

An upcoming wave of tech IPOs 

Since the first wave of Indian startup-tech IPOs—such as Paytm, Nykaa, and Zomato—listed in 2021, a bunch of other SaaS and consumer tech firms have listed in recent months. These include the likes of Mapmygain, RateGain, Zaggle and Mamaearth. SaaS is short for software as a service.

The pace of similar public listings is likely to increase, which will include SoftBank-backed companies.

“We anticipate 20-25 internet / enterprise tech companies incrementally approaching capital markets for India listing from now to the next 24 months," said Abhishek Bhagat, Managing Director, and head of Digital & Tech Investment banking at JM Financial. "This, along with already listed companies in the space, have a possibility of altering constituents of Nifty50 gradually, similar to the US markets."

Bhagat pointed out that currently, the S&P 500 top 50 has 44% weightage of IT and another 14% in communication services, effectively ~60% in tech and related segments, while in India none of the new-age internet companies are part of the Nifty50 (although tech services has a weightage of ~17% and telecom another 4.5%).

"Would expect this to significantly change over the next four to five years with broader weights in line with global markets," Bhagat said.

More from Softbank

Some of SoftBank’s other investments in the country that are IPO probables include unicorns such as, Flipkart, OfBusiness, and Lenskart, among others. Oyo, too, has said it intends to file again for public listing.

Other marquee companies that SoftBank holds stakes in includes Polygon, ElasticRun, Juspay, Cars24, Meesho, MindTickle, Whatfix, Zeta, Unacademy and Eruditus, among others, according to data from Venture Intelligence, a venture capital and private equity-focused data provider.