Japan's SoftBank to aquire 20% stake in bKash

Japanese tech investment giant SoftBank is going to enter Bangladesh by acquiring a 20% stake of the country's largest mobile financial service (MFS) provider bKash.

On completion of the transaction, SoftBank will be the fifth foreign stakeholder in bKash.

Brac Bank, the majority owner of bKash, has approved the execution of share purchase and subscription agreement among bkash and its existing shareholders in a board meeting.

In a stock market disclosure posted on the Dhaka Stock Exchange (DSE) website on Thursday, the listed Brac Bank announced that in accordance with the terms and conditions of the agreement, both primary and secondary investments will be made by SoftBank in bKash, where SoftBank will acquire 20% share of the MFS provider.

There will be no changes to the number of shares held by Brac Bank in bKash and, on completion of the transaction, Brac Bank will continue to remain the majority voting shareholder of bKash, according to the disclosure.

The existing other foreign investors in bKash are Money in Motion LLC, the International Finance Corporation, Bill & Melinda Gates Foundation, and Alipay Singapore E-Commerce Private Limited.

The SoftBank Fund, which invested in India's e-commerce platform FlipKart, would make both primary and secondary investments in bKash.

This means the new investor will get some fresh shares and buy bKash stake from any one or more of the existing investors.

Earlier, SoftBank Vision Fund I invested in the Indian MFS firm Paytm.

The Japanese tech giant is going to make investment at a time when bKash has been in losses for the past two years. Last year it made a loss of Tk81 crore.

Despite the losses, however, the company has been gaining market share gradually, holding its dominance in the MFS market through huge investment in technological development.

bKash started massive investment in technology in 2018 after Alipay, the China-based tech giant of Alibaba Group, made significant investment through buying 20% of its stake.

The tech investment in the past three years finally brought good results for bKash as it retained strong dominance by gaining nearly 85% of the total active customers of the MFS market in 2020.

The active customers are defined as those who made at least one transaction in the past 90 days.

In terms of registered customers, bKash holds 50% share of the MFS market.

The total registered MFS accounts stood at 9.93 crore at the end of December last year, of which, bKash contributed with over 5 crore accounts, according to Bangladesh Bank data.

"This latest investment round validates our dedication and relentless efforts over the last 10 years and places its trust on the potential of a well-regulated fintech space," said Kamal Quadir, founder and chief executive officer of bKash.

"It is a significant vote of confidence on the current and future growth trajectory of bKash. It also paves the way to attract global investment for other entrepreneurs and innovators of Bangladesh by showcasing the successful digital transformation of our country and its economy," he said.

"Broadening access to financial services can be critical to building a robust economy," said Greg Moon, managing partner at SoftBank Investment Advisers.

"We believe that bKash is strengthening Bangladesh's financial system by providing a safe and convenient way for people to adopt digital payments. bKash's simple and accessible mobile app is providing critical financial services to both banked and unbanked populations in Bangladesh. We are excited to partner with Kamal Quadir and the bKash team to help support the company's vision to achieve greater financial inclusion in Bangladesh through affordable, reliable and accessible services," he said.

Selim RF Hussain, managing director of Brac Bank, said the investment will have a significant impact on the company and economy as well.

The entrance of this foreign investor is the recognition of the country's socioeconomic development over the last 10 years, he said.

Brac Bank experienced a big jump in its share price at the DSE, thanks to the investment disclosure.

The share price gained 10% on Thursday, closing at Tk48.70 from the opening price of Tk44.30, according to the DSE.

Who is SoftBank?

Established in 1981, SoftBank Group Corp is a Japanese multinational conglomerate holding company headquartered in Minato, Tokyo, and focused on investment management.

The group primarily invests in companies operating in the technology, energy, and financial sectors. It also runs the Vision Fund, the world's largest technology-focused venture capital fund, with over $100 billion in capital.

SoftBank Group Corp reported a record loss at its Vision Fund unit as the value of public holdings like Coupang Inc and Didi Global Inc plunged.

The unit's loss in the three months until September was ¥825.1 billion ($7.3 billion), exceeding the ¥788.6 billion loss the business posted amid pandemic-driven writedowns. Overall, the Tokyo-based company had a net loss of ¥397.9 billion in the period, according to a Bloomberg report.

Masayoshi Son, founder of SoftBank, has sharply accelerated the pace of his startup investments this year, quintupling the number of companies in his Vision Fund II portfolio in less than nine months, said the Bloomberg report.

Funding for startups reached a global record of $156 billion in the second quarter, according to CB Insights. Son, meanwhile, increased the amount of money allocated to Vision Fund II from $10 billion at the start of the year to $40 billion in June. The billionaire also plans to invest up to $2.6 billion of his own money in the fund.