Softbank to pour additional USD 1.6 Bn in Didi

Softbank is planning its third capital injection of around USD 1.6 billion into China’s ride-hailing giant Didi Chuxing.

In an interview with CNBC, Softbank CEO Masayoshi Son said, “Even Didi, alone, we’re investing USD 1.6 billion or something as the additional investment to our earlier round. So, we’ve put — maybe twice and this is maybe the third round that we are investing.” This was response to a query on Softbank’s active moves in China and Southeast Asia.

Until now, Didi has received a total of USD 8 billion investment from Softbank. The Tokyo-headquartered company now owns around 20% of Didi shares, including the 5% sold by Alibaba in September 2017 at USD 639 million.

Softbank’s ambitions in the ride-hailing industry have been obvious. Besides Didi, it has also put money in Uber in US, Ola in India and 99 Taxis in Brazil. Recently, Softbank Vision Fund injected USD 1.46 billion in the Singapore-based ride-hailing firm Grab.

The fresh investment would be a cheer for Didi, which suffered a staggering USD 1.61 billion loss in FY 2018 owing to heavy spending on training and recruitment of skilled drivers. While Son acknowledged the deficit, he was positive on the return. “They are growing so quickly, the margin, the pay rate is 20% or more. It’s actually very reasonable, profitable business,” he said.

Didi suffered relentless pressure from all fronts in 2018. Following the murders of two passengers in three months, Didi reportedly slashed employees’ bonus, did large-scale layoffs, struggled with internal corruption and cut down its non-core businesses including the food delivery sector.

Despite the unexciting financial results and negative reports, Didi is not short of funding. According to third party database Tianyacha, Didi raised over USD 20 billion until last July. This has helped Didi’s international expansion. Didi has invested in taxi companies like Lyft in the US, Taxify in Europe and acquired Uber China in 2016.

More recently in February, Didi made a big move in the hotel sector — investing USD 100 million in India’s fast growing hotel chain OYO. Interestingly, Softbank and Grab both participated in OYO’s USD 1 billion round. Softbank is an investor in all three players – Didi, Grab and OYO.