Against the backdrop of Softbank backed WeWork IPO hitting a big valuation roadblock and the resultant soul searching bringing to light the huge potential valuation mismatches that may exist in many unicorns, CNBC-TV18 has learnt that the giant investment company, Softbank is undergoing a review of all its investments in India. Sources say that Softbank's global management has sought a comprehensive valuation and growth report of portfolio companies in India.

"The WeWork issue has been kind of a wakeup call. And that’s why global management has decided to do a risk assessment of sorts and review its investments across the board. With India being a strategic part of its long term strategy, Masayoshi Son and the Softbank global management has decided to do a review over and above the regular quarterly assessment that are conducted for every geography. The idea is to ensure maximized returns from portfolio companies and to stay ahead of the curve in times of market volatility," said a source who did not wish to be named.

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"So far Softbank has been looking to invest between $2-$4 billion in India in the coming years. Based on the review, the investment firm may look at marginally scaling down investment in India if need be”, he added.

SoftBank denied that its India portfolio is being reviewed. "Our India trajectory remains firm and we are committed to the market in the long term," a SoftBank spokesperson told CNBC-TV18.

CNBC-TV18 has also learnt from people in the know that the India team has been asked to furnish a comprehensive valuation and growth report of portfolio companies in the country. The team has been asked to review and report progress on key portfolio investments.

The company wants to differentiate between long term strategic investments versus secondary short term investment. For this, some portfolio companies may be restructured as well.

"Restructuring portfolio will mean exiting matured investments, closing key deals in the pipeline, looking at key buyout deals and charting out the financial health of companies it wants to hold on to in the long term;" added the source.

The current investment strategy of the company may be expanded as well. For instance, currently, a bulk of Softbank's over $10 billion investment in India have been in private companies largely focused on technology and start-up space.

While start-ups, consumer and technology will continue to remain the core focus for the investment firm, Softbank management wants to broaden its spectrum when it comes to geographies like India.

CNBC-TV18 has learnt that Softbank may now look at investing in publically traded companies that have a strategic fit for Softbank. CNBC-TV18 had earlier reported on Softbank being in talks with Piramal Enterprises for a minority investment. Not just that, sources say that it may even look at exploring sectors like real estate, infrastructure and power.

"So far Softbank, like many tech and consumer-focused funds, has stayed away from the capital intensive sectors like infrastructure, roads and power, Softbank wants to broaden its perspective and play a bigger role in the development of the countries it invests in. While the returns in these sectors may be limited in the near term, Softbank believes that the demand will trigger a massive yield in the long term,” the source clarified.

Softbank is also open to exploring interest in non-banking finance companies (NBFCs) and housing finance companies that have a proven and strong track record and will yield returns on a long term basis. Emails sent to a spokesperson of Softbank went unanswered at the time the report was published.

Softbank has so far invested over $10 billion in India and will continue to remain an active investor. With tightening regulatory norms and macroeconomic volatility impacting companies in various ways, it is prudent for a firm like Softbank to review its investments and ensure it is more vigilant than usual while placing its bets. Sources close to Softbank assure that India will continue to be a key geography for the investment major and will drive a major part of its revenues in the coming years.

First Published:Sept 25, 2019 4:26 PM IST