SoftBank’s second fund launches with pledges of $108bn

An animatronic model of SoftBank’s famous dog, known as Otosan, which stands in front of the company’s outlet in Ginza, in central Tokyo. (Shutterstock)
Updated 27 July 2019

SoftBank’s second fund launches with pledges of $108bn

  • Saudi Arabia’s PIF discusses investment in VF2, which could reach $150bn

DUBAI: SoftBank Group, the Japanese conglomerate run by entrepreneur Masayoshi Son, has officially announced the launch of Vision Fund 2 (VF2), an investment mega-fund aimed at the fast-growing global sectors of high technology and artificial intelligence.

As revealed exclusively in Arab News earlier this week, VF2 will be bigger than the $97 billion raised in the first fund.

In a press release, SoftBank said the amount already pledged has reached around $108 billion via a new set of “limited partners” — investors — including Apple, Microsoft, and a wide range of Japanese financial institutions. SoftBank itself is putting up $38 billion.

The Public Investment Fund (PIF) of Saudi Arabia and Mubadala of the UAE — the biggest investors in the first fund, with a commitment of $60 billion between them — were not named in the list of partners for VF2.

However, it is believed that both are considering big contributions to the fund, which could reach as much as $150 billion when it finally closes to investors next year.

Negotiations are continuing between the PIF and SoftBank over the extent of the Saudi contribution to VF2.

A PIF spokesman declined to comment on the negotiations, but stressed the “close relationship” between SoftBank and Saudi Arabia.

Rajeev Misra, CEO of SoftBank Investment Advisers, which runs the Vision funds, told Arab News that relations between the funds and the PIF are extremely close. “Our interests align. We stand by them shoulder to shoulder,” he said.

The first Vision Fund grew out of meetings between Son and Mohammed bin Salman, the Saudi crown prince and architect of the Kingdom’s Vision 2030 strategy to transform the Saudi economy away from oil dependency.

The extent of Saudi participation in VF2 will depend partly on how quickly Misra and his team can deliver returns to the PIF from VF1.

He said there are a number of initial public offerings lined up by the end of this year, which will deliver billions of dollars to the original investors.

One of the new investors in VF2 is the sovereign wealth fund (SWF) of Kazakhstan. It is believed that other SWFs — from Oman and Kuwait — are in talks with SoftBank over participation in VF2.

Misra said he is committed to creating tens of thousands of new hi-tech jobs in Saudi Arabia, and around a dozen of the fund’s portfolio partners will open offices in the Kingdom in the coming months.

VF2 is also involved in the NEOM project to build a hi-tech megacity in the northwest of the Kingdom.


Blame game as wheels come off India’s auto sector

Updated 7 min 57 sec ago

Blame game as wheels come off India’s auto sector

NEW DELHI: When India’s Finance Minister Nirmala Sitharaman claimed that a preference by millennials for ride-hailing apps was contributing to a painful slump in car sales, it sparked an online backlash from furious youngsters.

They started a campaign using ironic hashtags such as #BoycottMillennials and #SayItLikeNirmalaTai last week to push back against older generations blaming them for today’s problems in society.

While data shows firms such as Uber and Ola are popular with younger consumers more comfortable with shared mobility and digital trends, analysts say the auto industry’s problems run deeper than that — and it is facing more serious bumps in the road.

With a population of 1.3 billion people, India is the world’s fourth-largest car market and one where owning a vehicle is as much a status symbol as a means of transport.

But the country’s once-booming auto sector — seen as an important barometer of overall economic health — is in the slow lane, with sales slumping for the 10th-straight month in August.

“The minimum (priced) car that you can get nowadays starts from six to seven lakhs ($8,500 — $9,800),” university student Somya Saluja told AFP.

“So it’s much easier to pool-in rather than to buy a new car.”

Even India’s richest banker, Uday Kotak, recently said that his son was more comfortable using ride-sharing apps than owning a car.

Uber and Ola reportedly facilitate some 3.65 million daily rides.

Still, Avanteum Advisers managing partner VG Ramakrishnan told AFP the key reason for the drop in car purchases was economic.

“I think the slowdown is primarily because consumer confidence is low and income growth has really been impacted in the last couple of years,” he told AFP.

India’s economic growth slowed for the fifth-straight quarter in April-June to reach its weakest pace in five years.

Banks are also more reluctant to lend owing to a liquidity crunch caused by the near-collapse a year ago of IL&FS, one of India’s biggest shadow banks — finance houses responsible for significant consumer lending.

There are also extra production costs caused by new rules requiring cars to be compliant with emissions and safety standards, while a 28 percent goods and services tax (GST) introduced in 2017 has dampened demand, analysts said.

“Cars are increasingly becoming unaffordable now because of so many taxes,” Karvy Stock Broking auto analyst Mahesh Bendre told AFP.

“To put things in perspective, if you buy a car in India, at least 40-45 percent of costs go to the government in terms of taxes and registration charges and so on.”

A year ago, India displaced Germany to become the world’s fourth biggest car market, having clocked up annual sales growth above seven percent for several years.

But the promising growth ride is screeching to a halt, with passenger car sales tumbling this year, including a 41 percent drop last month — the worst since records began more than 20 years ago.

Aside from passenger cars, sales of commercial vehicles, motorcycles and scooters have also been hammered.

With the industry — a major employer in India — contributing more than seven percent to total GDP and almost half of manufacturing GDP, the potential fallout from an extended slowdown is sending shockwaves through the economy.

Manufacturers are reducing production and cutting jobs, which is also affecting related industries such as auto component manufacturing and at dealerships, totaling about seven percent of India’s total workforce, Bendre said.