SoftBank Group (SFTBY, Financial) has achieved its largest quarterly profit in two years, propelled by successful IPOs in the Indian market. The Tokyo-based company reported a net profit of 1.18 trillion yen, significantly reversing last year's loss of 931 billion yen, and surpassing analysts' expectations of a 295 billion yen profit. The Vision Fund contributed 373 billion yen to these earnings, benefiting from increased valuations of companies like DiDi Global (DIDIY) and Coupang (CPNG).
The boom in India's IPO market has revived hope for the Vision Fund, which has struggled to achieve returns commensurate with its scale of over $100 billion. The fund has profited from the successful market debuts of startups such as Ola Electric Mobility and Brainbees Solutions. The upcoming $1.3 billion IPO of SoftBank-backed food delivery app Swiggy has been oversubscribed by more than three times, further highlighting SoftBank's fruitful period in India.
Despite facing significant losses over the past two years and holding investments in numerous loss-making startups, SoftBank and the Vision Fund have adopted a more targeted investment strategy, focusing on generative artificial intelligence. Recent investments include companies like OpenAI and Perplexity AI Inc.
Astris Advisory analyst Kirk Boodry noted that about half of the second-quarter earnings resulted from the potential upswing from Indian IPOs. A revival in the U.S. IPO market could bring additional gains, but SoftBank's plans in AI may be even more crucial.
Masayoshi Son, the founder of SoftBank, is preparing to make significant strides in AI and semiconductor investments. The company has amassed substantial cash reserves, with its non-debt assets appreciating, particularly due to the soaring stock price of its chip subsidiary, Arm Holdings (ARM). Despite fluctuations in SoftBank's stock price, linked to changing investor attitudes toward AI's potential to improve life quality, the stock has seen a recovery after a dip following a peak in July.
It is noteworthy that rising interest rates have significantly reduced the value of high-growth tech startup stocks held by SoftBank, leading to prolonged tightening in Son's investment business. However, some valuations are beginning to recover, boosting the Vision Fund's investment returns to 608 billion yen. The fund has posted profits in four out of the last five quarters.
Although Vision Fund 1 has seen total gains of $22.6 billion since its inception, these have been largely offset by Vision Fund 2's $21 billion losses. Beneficial exchange rate movements, specifically the appreciation of the yen against the dollar, contributed 289 billion yen in gains as dollar-denominated debt became easier to finance in yen.
