Japan-headquartered telecommunications and internet group SoftBank has written down ¥58.1bn ($555m) of investments in India-based companies Ola and Snapdeal, according to its six-month earnings report ending September 30.
The report stated the cash reflected negative “changes in fair value of preferred stock investment including embedded derivatives” in the companies.
Snapdeal operates one of India’s largest e-commerce marketplaces, and was valued at $6.5bn to $7bn in a February 2016 round in which it raised $200m from media company Bennett Coleman & Co (BCC), Brother Fortune Apparel, Ontario Teachers’ Pension Plan and Iron Pillar.
SoftBank provided $75m for Snapdeal in 2013 and returned the following year to invest $627m at a valuation somewhere between $2bn and $3bn according to press reports. It supplied $210m for ride ordering platform Ola, then known as Olacabs, on the same day at a $1bn valuation.
The firm returned for a $500m round in September 2015 that was led by e-commerce group Alibaba, and which valued Snapdeal at $4.8bn. That round also featured manufacturing services provider Foxconn, mobile software producer Myriad, Temasek, BlackRock and PremjiInvest.
Snapdeal has raised about $1.7bn altogether, and e-commerce company eBay and Intel Capital, which invests as a subsidiary of chipmaker Intel, are also among its backers, as are Ru-Net, Saama Capital, Nexus Venture Partners, Kalaari Capital, Clouse and Bessemer Venture Partners.
Ola has raised about $1.25bn in funding, including $400m in a SoftBank-backed series E round in April 2015, and $557m in a round also featuring SoftBank in December 2015 that valued it at $5bn.
The investments were made as part of a drive by SoftBank to direct its corporate venture capital money to fewer, larger investments as it looked to beef up its internet holdings, particularly in India where it has also backed realty portal Housing.com and hotel room service Oyo Rooms.
However, both Snapdeal and Ola are competing in sectors where competition is fierce, and where they have had to burn through large amounts of capital to compete with rivals – in Snapdeal’s case Amazon and Flipkart, and in Ola’s the US-based Uber Technologies.
Snapdeal’s sales growth has slowed, according to a SoftBank presentation in May this year, which could account for the drop in value. Ola is in the process of raising $600m in a series G round that could reportedly be led by SoftBank.