SoftBank Group Corp. has posted its largest quarterly profit in two years, fueled by a successful run in India’s booming IPO market. The company earned a net income of ¥1.18 trillion ($7.7 billion) for the quarter ending in September, a dramatic turnaround from a net loss of ¥931 billion in the same period last year. Analysts had predicted a smaller net income of about ¥295 billion, making the results an impressive surprise.
The Vision Fund, SoftBank’s investment arm, played a significant role in the turnaround, contributing ¥373 billion to the profit. This gain was driven by the rising values of companies such as Didi Global Inc. and Coupang Inc., alongside strong performances from new IPOs in India.
India’s IPO Boom Fuels SoftBank’s Growth
A key factor behind SoftBank’s success this quarter is the robust IPO market in India. The Vision Fund has been able to capitalize on successful debuts from several high-profile startups. Companies like Ola Electric, an electric scooter maker, and Brainbees Solutions, an online retailer of baby products, are among those that have performed well. Additionally, Swiggy, the SoftBank-backed food delivery app, is poised to launch its own IPO, which has been oversubscribed by more than three times its initial offer.
This surge in India’s IPO market has brought a welcome boost to SoftBank, which had struggled for years to generate significant returns from its Vision Fund. Since its launch, the fund has faced challenges, including substantial losses during periods of falling startup valuations. However, the recent success of Indian startups has marked a shift, bringing much-needed optimism.
A Turning Point for SoftBank’s Vision Fund
The Vision Fund had been facing difficult times, posting two consecutive years of heavy losses before returning to modest profits in fiscal 2023. The fund had previously invested large amounts in small startups, often struggling to see positive returns. However, SoftBank has recently changed its investment strategy, focusing more on specific sectors such as generative AI. Notable investments include stakes in OpenAI and Perplexity AI.
Kirk Boodry, an analyst at Astris Advisory, noted that nearly half of the Vision Fund’s recent gains came from the success of Indian IPOs. While the potential for further IPO success, particularly in the US, could drive additional profits, Boodry emphasized that SoftBank’s focus on AI will likely be its most important move moving forward.
Looking Ahead: AI and Semiconductor Investments on the Horizon
As SoftBank celebrates its recent success, founder Masayoshi Son is gearing up for a significant push into artificial intelligence and semiconductor investments. The company has built up a strong cash reserve, and the value of its assets, excluding debt, has risen thanks to the share price increase of its chip affiliate, Arm Holdings Plc.
Despite fluctuations in SoftBank’s stock price due to investor uncertainty over AI’s impact, the company’s recent profit and strategic shift toward technology investments signal a promising future. SoftBank’s ability to capitalize on new trends, such as AI, could further solidify its position in the global market.
Related topics:
