SFTBY - SoftBank Group Corp. (SFTBY) Q1 FY2023 Earnings Call Transcript
2023-08-08 16:46:02 ET
SoftBank Group Corp. (SFTBY)
Q1 FY2023 Earnings Conference Call
August 8 2023 3:30 AM ET
Company Participants
Kazuko Kimiwada - Senior Vice President, Head of Accounting Unit
Yoshimitsu Goto - Board Director, Corporate Officer, Senior Vice President, CFO and CISO
Navneet Govil - CFO, SB Investment Advisers and CFO, Member of Executive Committee, SB Global Advisers.
Conference Call Participants
Masayuki Shikata - Nikkei Newspaper
Masahiro Nakagawa - NewsPicks
Presentation
Operator
Thank you very much for waiting, everyone. Now we would like to start the SoftBank Group Corp. Earnings Results briefing for the three months period ended June 30, 2023. First of all, I would like to introduce today’s participants. From left, we have Yoshimitsu Goto, Board Director and CFO; Kazuko Kimiwada, Senior Vice President and Head of Accounting Unit; Navneet Govil, CFO, SB Investment Advisers and CFO, Member of Executive Committee, SB Global Advisers.
Today’s briefing is live broadcast over the Internet. Now I would like to invite Mr. Goto, Board Director and CFO, to present you the earnings results and business overview. Mr. Goto, please.
Yoshimitsu Goto
Well, thank you very much for your attendance for today’s meeting. My name is Goto, CFO SoftBank Group Corp. So I would like to present you the earnings results for the first quarter. First of all, I would like to touch on the market status, to begin with. As an investment company, what we need to begin on is the market environment and also the economical environment, at the same time we also need to see the geopolitical situations, global situations, those kind of thing is something that we always need to be keen.
And starting for this April to June period, we have been careful to watch all those important factors. At the previous earnings announcement I said market is showing the recovering trend sign but at the same time also there are still several considerations which we do not see the clear solutions for, so that we do need still keep on being very alert and careful. But at the same time, also we would like to take a lead before all the movements occur so that -- but at the same time to be selectively, that we would like to concentrate the investment activities.
And looking at the equity market, in the last three months actually showing a very good trend and as you see on the graph, on the top of this graph is Thomson Reuters Venture Capital Index. So private equity’s KPI is also showing a very good trend in the past three months at the same time public securities is also showing a good sign too.
And the Golden Dragon China, the Chinese market’s KPI, looking at the January demand, we were a bit concerned but now for the April to June period, showing a good recovery trend. But when you go a little bit more deeper, especially the public securities in United States, we believe Magnificent 7, so called which used to be called GAFAM, those large logos, Alphabet, Amazon, Apple, Meta, Microsoft and NVIDIA, those seven major companies, large company’s share price is actually making a big drive -- becoming a big driver for the recovery of the market.
Of course, there are some other positive factors as well for this recovery. And for us looking at the public securities movement in the past three months, actually, the number has been showing a very positively, NASDAQ -- compared with NASDAQ, we believe that our trend is becoming very similar to NASDAQ these days. And looking at the current status of the market and the Vision Fund progress, looking at past few periods, actually, we returned to profit for the first time in six quarters. This is one of the highlight for this earnings, I believe.
This is the Vision Fund standalone basis. So it's not a consolidated base, so that it's positive figures showing here on your right, $975 million. As a result, to the cumulative gain/loss on the investments, this again is the first turnaround in six quarters. So now you see that the trend has turned around. So based on this trend, we also like to make a good balancing between [guess] and brake for the reinvestment activities.
So April to June quarter, Vision Fund investments and also or investment from SBG, in total, it was about $1.8 billion of the investments has been executed. Since we made a little bit of -- we made an announcements or shifting to offense mode, last year, a whole year was almost stopped in terms of investing. So when you look at the three year trend, we've been carefully, carefully restarting our investment activities.
I hope you get that kind of sensitivity here that we are carefully and slowly moving back to the investment activities. The investments that we have done so far has been selectively considered and at the same time keep focusing on the AI trend and for the future growth, that we would like to start having a good relationship with those companies for the future of the group.
Back in June, when we had a shareholders meeting, our Chairman and CEO, Masa came back to the stage and talked about shifting to offense mode. I believe we are actually shifting to the offense smoother, but at the same time from CFOs point of view, we would like to be carefully and selectively. When it comes to shifting the offense mode, our baseball team Hawks also needs to be back to offense mode. We've been having a bit of difficult games and challenging games these days but baseball as well as the business needs to shift towards offense mode after we had a very challenging period in the past.
With those understanding, let me share with you the consolidated results. First quarter consolidated results as you see, net sales, as we are the investment holding company, so that the ¥1.5 billion more important the net income minus ¥477 billion. And also the loss on investments and you see the change on your right, ¥2.63 trillion of the net income improvements, but the loss on investments has improved by ¥2.1 trillion. And this is compared to the market trend recovery. Maybe we should be a little bit better than this numbers but there are some reasons behind for those.
And also the gain and loss on investments, this is the Vision Fund number, so this has been netted off for the consolidated base. So there are several companies Arm and PayPay, these has been netted off from this numbers point of view, but still that they are coming back to almost back to the originals. And with that gain and those on the investments minus ¥699 billion, this is materially improved compared to the previous year.
But when you look at the breakdown, out of the ¥699 billion of which ¥550 is due to the loss on Alibaba due to lower share price. And wanted you to recall that this monetization of Alibaba share has already been completed, however, we still keep on holding our shares. And because we have done the derivative transaction which has already completed this is kind of a forward transactions. Therefore, when share price goes down, derivative point of view, it is positive.
So this derivative gain related to the shares is shown on the dotted line derivative ¥769 billion is the derivative gain. Therefore the accounting item wise is different. So that this still remains as a negative for the gain and loss on investments but Alibaba ¥200 billion is positive after net-net. So for the -- looking at the gain and loss on investments, actually effectively, we can say that our status was positive, that's something that the real status of the company.
And here is the income before income tax by segment. Here, showing the performance of the income before income tax. So Investment Business of Holding Companies, it's still minus ¥394 billion, change wise difference is ¥803 billion. And the Vision Fund is contributing ¥2.4 trillion positively. In the consolidated base it was minus ¥176 billion and net income ¥477.6 billion, as I mentioned earlier in the previous page.
And here, I want you to see the breakdown of that and as a matter of fact, because of the weak yen. There ForEx, ¥464.6 billion less on foreign exchange. So, this as well should be regarded in the gain and loss on investments, but here in net income, the ForEx impact has been shown here. So, this actually comes up to the P&L. So as an investment holding company, weak yen, whether this is good things or bad things. Actually this is very good, which I will cover that later pages. So as a result net income although that this is minus ¥477 billion. However, the insight or the breakdown is coming from the P&L, negative from the ForEx, again that I believe that effectively its almost breakeven, that's the kind of real picture of SoftBank Group.
They are very important key indicators for us as an investment company, net asset value or NAV loan-to-value or LTV and cash position. Compared to the end of March this year, in all indicators we have seen improvement. For example, NAV increased from ¥14.1 trillion to ¥15.5 trillion and LTV 11% to 8%; cash position almost ¥6 trillion, so, all three indicators improved. So, we can be proud of saying that we are in a good position in terms of our financial basis.
This slide shows change in NAV, main driver is ForEx. When yen is weaker, the value of asset goes up, so it's not a bad thing. Every quarter, we have announced financial results and the share price it’s at plus ¥0.4 trillion, which has been negative for a long time. And this term, we have seen the positive number of a share price for the first time for a long time. Impact the ForEx in terms of P&L, minus ¥0.5 trillion yen impact.
But if you analyze further, why it's negative? Because borrowing in foreign exchange denominated increases in terms of yen and borrowing in foreign denominated currency, do we have a lot or not? For example, our foreign currency denominated bond is of course, a borrowing in foreign currency and we have group companies and we do exit, we do recoup and when we get our contributions from group companies, there are a lot of intercompany loans in foreign denominated currency. That's why we see the negative number because our borrowing and foreign currency denominated, the value went down when yen is weaker and in terms of net asset value it has a positive impact of ¥1.3 trillion. So, again, weaker yen is good for us as an investment company.
And this slide shows NAV per share and the share price. This is also one of the important aspects that we should look at. And investors and analysts often say or often use the term SoftBank discount. And NAV per share, if you look at that, our share prices are very weak or cheap because of the discount people often say. As of end of March, the discount was 46%, but at this moment, thanks to increased share price and more than the increase of assets, so, at the moment, we are looking at a 36% of discount. So, discount has improved. To what extent we should have it improved? Of course, there are a lot of discussions and comparison pretax from cash tax perspective. In theory it should not be zero. But for investors, we want to make effort technically and essentially to improve this, our discount status.
This slide shows equity value of holdings. The highlight here is Alibaba monetization which we completed and if you look at dark blue, second from the bottom, ¥3.7 trillion in Q1 FY2023, which indicates our value. So steadily Arm has been adding value to its business. So all-in-all, equity value of the holdings was ¥16.9 trillion in the quarter. So it has been decreasing for a long time, but now we are beginning to see the turn around.
Since 1998, this graph shows a trend of net asset value. I joined SoftBank in 2000. So, I have been in SoftBank for almost whole time of this time horizon. And again, we are looking at upward trend this quarter and the last quarter. Considering possible IPO of Arm, we are expecting this to improve further and increase further. This slide shows trends of loan-to-value, looking back the history, currently 8% and this is the lowest in our history. Loan-to-value is low means we are safe. Is it good or bad? Well, people may say that you're not doing your job, you're too safe.
But as an investment company taking into account of our stance change from defense to offense, loan-to-value, of course, we have a strong rule or financial policy, we want to make sure that we operate our business in a safe, disciplined manner and to what extent we should allow loan-to-value’s fluctuation? There is no correct answer. We keep saying 25% because 25%, don't you think that 25% is safe from just a traditional perspective. Since we became an investment company, loan-to-value’s average for the last four years was 15% and looking forward we make sure that we are running the business in a very safe manner from an LTV perspective.
Now cash position, we believe that we have the highest amount of cash position in our history, almost ¥6 trillion. So those are key indicators and also I touched upon P&L and balance sheet. And the SoftBank Vision Fund, in the first quarter total gain on investment was $1 billion. We have three boxes, if you will, in terms of Vision Fund. Vision Fund 1 which we started first and Vision Fund 2, which is ongoing. Vision Fund 1 investment was already completed. And LatAm Funds and SoftBank Vision Fund too are still making the investment.
SoftBank Vision Fund 1, we saw $1 billion positive, Vision Fund 2 still negative but all-in-all, combined $1 billion of gain on investment, positive number for the first time in six quarters. For Vision Fund 1, against about $90 billion of investment cost, return $102 billion. As you can see orange part which is exited, has been getting bigger and bigger. They had some challenging time but they still are making sure that they get returns. SoftBank Vision Fund will not only invest in public company but also private companies as well, which include Arm.
When Arm is listed and when its valuation is appreciated by the market, I believe that Arm will contribute to Vision Fund 1, a lot. There are a lot of companies that can be listed in the pipeline. And also we will support Vision Fund 1 and monitor Vision Fund 1, to make sure that the investment is surely monetized. Vision Fund 2, we just started investment about three years ago. It's been going through a very challenging market conditions against $52 billion of investment cost, return, it was only $33 billion, but this fund is still young. And going forward, Vision Fund 2 will take a lead in future investments. And we will keep watching our fund performance to improve their operations.
And this slide shows value changes in portfolio which I'm sure you're familiar with. Whether portfolio companies gained or lost their values, left hand side shows the status three months ago, cumulatively. Unfortunately, however, the red pie which lost value was 346 companies. The number has been getting bigger and bigger from 100, 200, and 346 as of March 31 st . So, the portfolio had been deteriorating. But if you look at the right hand side, slightly, the number of companies lost their value got smaller from 346 to 343. And companies who gained value, the number increased from 101 to 112, slightly increase. Again, this is cumulative number.
And if you look back further, on the left hand side, compared to the term from October through December, how the portfolio changed, 109 companies lost values and 88 companies gained values. We saw a sign of improvement in the quarter from January through March. But if you look at the right hand side, the number of company gained value reached 150 and the company that lost value improved from 192 through 116. So, again, we can say that we are beginning to see the turn of the trend.
We will keep monitoring Vision Fund against a backdrop of challenging market conditions and we can't be complacent. But for those portfolio companies, we are looking at the positive change which I want to highlight here today. In quarter one; invested amount was $0.9 billion in terms of Vision Fund. And SoftBank’s standalone investment was $0.9 billion, so total $1.8 billion. So slightly we started accelerating investment.
Vision Fund has close to 500 portfolio companies and we like to take an advantage of this network for our group management and also synergy, positive synergy between those companies is also important. Navneet here is also making an effort to connect and arrange those portfolio companies each. The Sozo Connect is one of the events that gathers the portfolio companies to networking and that having a dialogue between those companies also inviting investment bankers or our members to study is the good part about each other, that has been held sometimes. During the COVID period, it has done in London also after that have been held at Paris or Japan and so on or India. And at the same time, we would like to encourage those portfolio companies to start entering into Japanese market and we actually support those activities.
Here as you see that we've been enhancing ecosystem to for them to enter into Japanese markets, already 50 portfolios are -- start operating in Japanese market. Of course, this is just the beginning, we would like to see and expect bigger success of such an activity and provide business opportunities to Japanese companies inside and also outside SoftBank Group, including SoftBank, K.K., which is the domestic telecom operator, but at the same time, they can be the big agent for the portfolio companies coming into Japanese market. So SoftBank K.K. has been playing a good role to kind of assist those companies to come into our market.
Here shows the AI technology mapping that I would like to touch on a little bit. As we invest and also or shifting to offense mode, we -- because we would like to kind of catch up the opportunities here. Of course, that the Vision Fund has done, start investing about six years ago, and actually since then, that we've been very much focusing on AI. These days that we see the very good trend in the popularity of the generative AI and very much a trend. But generative AI is only the one part of, one component of the overall AI but there are other AI technologies such as the natural language processing, deep learning, machine learning and so on.
So, I believe that we can break down into about 10 segments or 10 sectors for the AI technology. Here that I show as one examples of such AI technology use cases, starting from Frontier Tech to Enterprise Consumer, and so on. So Logistics, FinTech is also included in here. And EdTech is also one of the examples. And you see that the example we invest is for details of such companies. If you like to, need to understand more, please contact Navneet here, but the Vision Fund has been already start investing, or started looking into not only generative AI but variety, wide range of AI technology and being very selective to put the money into such companies.
Next is, I'd like to touch on that a little bit about Arm here. I want to make a comment however, because they are preparing for IPO, so I cannot really say anything. That's a comment I can say about Arm, I'm sorry about that. But for revenue you see the numbers $641 million so from year-on-year, a slight decrease. So short term period, semi-conductor industry is on a little bit of a down cycle. But if you see the past three years, the annual growth rate or the three year CAGR is 14%. And also the value of this company actually that real picture is going to be seen going forward.
So that there we see AI trend, they are the one that are designing chip and they have a very great track record of all such businesses. And we believe that they will be above edge in many areas, many sectors. I cannot touch on much of the value that the legal has been telling me that very strictly that I should not be talking too much about here so that I’d like to stop here. But what I can say is that the area that they are covering is even more expanding.
So not only Arm that are working on chip, of course, Intel used to design and produce. But the Arm actually showing their capabilities, starting from the mobile device that they are having a great deal of market shares and many people utilize a such mobile device, Smartphone to tablets that it's been used inside, and those chips are very much close to design chip.
And when it comes to cloud compute, automotive, compared to five years ago that the chip for the cloud compute or automobile is different, it's been changed, automotive itself that it's been evolving in autonomous driving and so on. Cloud compute has also changed because generative AI belongs to this area, so that the Arms capability can be truly taken in many, many more areas.
So, in our life, IoT is the one that we can see, smart camera or the facial recognitions, those is also done with Arm, these latest edge technology chip. So, I believe that their chip is highly evaluated from the sense as everywhere that the Arm is being used. And one announcement that are done in May 2023 by Arm is the computing platform for mobile and Arms latest edge technology CPU has been built in. So for example in gaming, immersive gaming experience which you have ever experienced before, that kind of technology has been also shared since then, and the latest GPU is also mounted. Therefore something there close to your life, technology has been used for the -- by the Arm technology.
In the next is the NVIDIA's announcement, that they have announced the Arm-based supercomputer recently, back in May 2023 and that they have adopted the latest chip. And through this supercomputer, we believe that medicals and scientific research is going to be making good progress and also Europe's most energy-efficient systems according to NVIDIA. So this is also great events that we have seen. And Arm’s IPO plan is going very smoothly. And today, I am not going to share the financial status or business progress of Arm, from me. But once public filing is made, then, I believe some information is going to be available so that I would like you to wait for that.
And here it's titled AI Reshapes the Industrial Landscape, because there are some companies that we have invested in April to June quarter. And there are three companies that I would like to share with you today as an example. Basically, it's logistic-related, and because AI is revolutionizing every industry and actually internet is basically the advertisement model from the business point of view. But advertising revenue is $0.3 trillion but the $1.8 trillion for logistics, so it's quite a difference of the logistic market size as a percentage of GDP in United States. In Japan, a bit smaller size, but 1% advertisement and 9% logistics, so it’s quite similar to United States.
And AI actually redefine. So they have a capability of redefining all the sectors in industry. So that we believe the logistics can be redefined in many aspects. And we've been making some investments based on that hypothesis. And we've been -- we invested in those three companies Symbotic, which was already invested by Vision Fund, and what we did was to establish a JV with SBG’s investment commitment of $3.2 billion and acquire additional 3% interest for $500 million in July 2023. Also, we acquired all shares of Berkshire Grey. Vision Fund actually had an interest of about 28% of this company, and we decided to privatize by acquiring all shares, and TELEXISTENCE, which is a Japanese company, we acquired a share through the ¥23 billion round in March to June 2023.
First, Symbotic. Let me briefly share with you what they do. Symbotic provides warehouse automation platform for retailers and distributors. Let me share with you a video clip.
[Video Presentation]
So that was Symbotic and they've got great growth potential and they ran at 40 kilometer per hour. I think in a warehouse there's a regression down to 4 kilo meter per hour because of the safety concern. But if there's none, no person at home all in the warehouse, the robot or cars can run as fast as 40 kilometer per hour. So that should help improving efficiency of the warehouse. Together with Symbotic, we announced to establish a joint venture called GreenBox Systems, so that we can provide warehouse-as-a-service to varieties of customers.
Next Berkshire Grey, we have had relationship with them for some time. And for logistic providers they provide EC fulfillment, replenishment system, and robot solution and so forth. There are a lot of competitors, actually, but we found value in their technology as well as the senior management team.
And TELEXISTENCE is one of the three companies that we invested in recently. They develop and deploy remote control technology and AI robots. In fact, they have signed big deals with major convenience stores in Japan. They are good at developing AI based robots. And their growth potential again is something that we are excited about because it's so relevant to your everyday life.
Now, let me talk about financial strategy, no change at all. No matter how fast or slow to resume investment, we want to make sure that we adhere to our financial policy. And this is the commitment we have made and we still have. And also, financial management adaptable to both defense and offense is another pillar of the strategy. Our financial policy includes maintaining LTV below 25% in normal times, maintaining at least 2-year worth of bond redemption in cash. I think we have 2-year worth of bond redemption in cash.
Actually, it may be too much but again, we need to make sure that we have a plenty of cash position for bond redemption, bond market may get shut down immediately. When the bond market or CP markets closed, companies that rely too much on those markets may go bankrupt, immediately. There are a lot of risky or dangerous companies in Japan. We, as an investment company, may be one of those companies if we fail to operate properly.
Bond maturity, three year or five year or seven year. Let's say, there are five-year bonds and when maturity comes, should we return to you in cash or would you like us to give you similar financial instruments, we want to ask the questions to those investors. For that, we need to have plenty of cash in our hands. And sometimes we get criticised and that criticism is wrong. And once you face market risks for investors, it's important to have options.
So again, running a business safely is something that we need to keep doing. And also we want to secure recurring distributions and dividend income from SBF and other subsidiaries. Again, offense and defense, we want to be flexible in running our financial operations.
If you look at the top right, Investment in the Information Revolution, while maintaining financial stability, we don't want to miss opportunities. We are information revolutionaries, if you want, we need to take a lead in the global environment. And the necessary investment activities are something that we will do, but at the same time we have very stable, safe, financial operations.
Capital allocation and return to shareholders are something that our investors are interested in. Financial improvement is something that credit investor may be interested in and new investment is needed for company's growth. And shareholder’s return is important for investors and financial policy is also in post important. We made our share buyback worth ¥4.5 trillion recently, we will do that. But the timing and how much, give us some flexibility. And we work on improving our finances. And we make sure we have a very strong financial policy to meet promises that we have with credit investors.
Last but not the least, let me talk about taxes. I think I have never talked about tax in public forum like this, before. And there is some misconception that SoftBank does not pay tax. In fact, some media has such misconception. Look at those numbers, in fact, we have paid a lot of taxes. On the consolidated basis, from FY 2018 through 2022, if you look at the top right, ¥2.6 trillion, so for five years, we have paid a ¥2.6 trillion.
Usually or every year we have paid ¥500 billion about year-on-year. And telecom operators pay tax, Yahoo pays the tax but Holding Company does not pay tax. Again, that's a misconception. If you look at somewhere in the middle, in FY 2022, Japan ¥469.7 billion, that's the tax that we paid in Japan, including operating company’s tax ¥255 billion, not only tax paid by operating companies like SoftBank and Yahoo. SBG and intermediate holding companies pay the tax as well.
Through holding companies we have made a lot of investment, SBG standalone and 100 subsidiaries controlled by us. And if those 100% wholly-owned companies were sold, then those wholly-owned companies paid the tax. So again, effectively SoftBank Group has paid ¥214 billion in FY 2022. Overseas, of course, we paid a ¥56 billion in FY 2022 as an investment vehicle. So again, in Japan, as well as overseas, we as an investment holding company, pay the taxes
Just for your reference, Top 10 Consolidated Corporate Income Tax Payments. I wish, media had created a chart like this, but we have done on behalf of them. Toyota Motor, of course, they paid a lot of taxes, and NTT, and we are actually not far from NTT. So again, we work for the company, and we work for the country. We pay tax, so that's something that we'd like you to pay attention to as well.
So that's all from myself. And thank you very much and we look forward to hearing from you and question-answer-session. Thank you.
Question-and-Answer Session
Operator
Thank you. Now we would like to move on to a Q&A session. First, we would like to take questions from the floor. [Operator Instructions] So first row person, that I would like to take this person's question first.
Masayuki Shikata
My name is Shikata from Nikkei Newspaper. I have two questions, please. First, Masa said in AGM talking about shifting to offence mode. So at the AGM, he is now that I believe changing his phase from investor’s phase to the operator’s phase, so semi-conductor’s, robotics and so on. Well, on the investment, what kind of activities that the Masa does or the -- what do you think for the -- as an activity for the turning around or the shifting to the offense mode?
Yoshimitsu Goto
Masa, as for Masa, is he investor? I believe he is an entrepreneur. He is the founder of SoftBank. And he is always keeping his entrepreneurship in his mind but once he start business, you also need to do the operation and you have to do the operation, then there will be many stakeholders, you will have accountabilities, you have to keep the governance and compliance for the business. And he is saying that it’s right-hand side of the brain and the left-hand side of the brain. And that is the -- operation is actually the left-hand side brain work. But actually the enhancement of the value of the SoftBank Group I believe that he needs to use his right hand side of the brain and that contributions the most to the growth of business. And he believes that and rethinks way too.
So, us hearing your question from investor to business person, you may see him in that way, I understand what you mean, in the past few months or in the past one year or so and also his comments or explanations in AGM looks like so. I understand. But what he’s doing, he is very much focused and dedicated into AI business. What can we do, what should he do, that something that he is thinking around the clock, 24/7 and we are having meetings almost every day and we out hearing his energy out from his body and that’s a tremendous energy that he is generating here. So, of course, the investing activities and also start the business by setting a company, those kinds of things can be one of the things that he may consider, but many things that can be done, but the very root of himself is entrepreneurship, I believe.
And based on the entrepreneurship, that he likes to access to the many areas and we are the operating side, we are the operating team that the we’d like to kind of bring it down to the business based on his ideas and the goal and crystallize the value. That’s the bit big picture answers, but that's the answer for your first question.
Masayuki Shikata
And my next question is the interest rate hike that I would like to ask you about. Rate hike in the raising market or the situation may have changed. In the previous earnings, you also mentioned that the rate from floating to fixed, that you've been already addressing the rate hike, but the even in a fixed rate but when you refinance the debt or the payments of the coupons, how do you addressing the current status of the rate hike?
Yoshimitsu Goto
Actually these days rate hike is not the reason that we are changing from floating to fixed. For example, and regardless of good or bad in the past 20 years, we've been enjoying the very low -- lowest rate so far. And me, for example, 1987, I became a banker and start as a business person in the bank. And it was a 6.5% for the loan prime rate and the pension was 5.5% or to 6% because I joined a Trust bank, so those are the numbers that I remember and compared to that the 20% in the past 20 years, this rate is almost nothing. So that changing to the floating rate maybe we can take the advantage, maybe we can take advantage of 10 basis or the 20 basis. But that's not financing activity because IRR 30% is a business we are pursuing as a company.
So we always try to take all the opportunities for the financing as much as possible. That's the kind of way we are thinking for our financing activity. As a result, when we see the rate hike, financial policy has actually aligned with this movement. We don't know for the future, [once] that goes on and on. And then that there are some time where that we may see some decrease in the rate as well. And what we should do is something that we should consider when that time comes but 30 years to 50 years, that's a kind of a long term that we been with this rate environment. And I don't believe that we need to rush at this moment.
Weak yen, strong yen, the foreign exchange is a big concern. But we would like to pay a close attention to that. And but at the same time, whether we can finance whenever we want to finance, that I think I don't care. I don't consider much because we have confidence in our credit, in the asset balance of the company and the status of such assets, I -- we believe that we will be able to raise when it's necessary.
Masayuki Shikata
So you have a cash, fluent cash position, so that you don't need to depend on the refinance of the debt. Is that what you mean?
Yoshimitsu Goto
No, the bond market itself is functioning very well at this moment. So that when the redemption timing comes, for example, domestic bonds, I believe we have a full access to the domestic market, bond market. For the foreign bonds, about a year ago, the financing cost was over 10%. In such a circumstance, we just need to change the raising market in those cases. We just shift towards domestic and raise in the domestic market. So that's the kind of operation that we can study.
But the rate itself because right now, the things that we’ve already raised mainly are the fixed so that we don't need to see the change of the rate and going forward when the maturity comes and when new financing comes, then that's going to be using a new rate. So a little by little we may have some impact from the rate hike, but the maturity is actually diversified over 10 years. So it's not that the big change will occur in one year or two year.
When it comes to the global bonds, if the rate is high, we don't need to do the global bonds. But we also need to see the deposit and loan balance. We have almost ¥6 trillion cash and 80% are managed under US dollars. And looking at the EU or the US, dollars actually is very high and so that we will be able to net, out of those. So that considering that balance, I don't see any big issues for the management of such cash.
Operator
Thank you very much. Next question from the floor.
Unidentified Analyst
Thank you for taking my questions, I have two actually. First about Arm, and Arm IPO preparation is going well, you mentioned but timing and NASDAQ or anything? Could you give us a little bit more color, please?
Operator
Who?
Unidentified Analyst
Ollie from Bloomberg.
Yoshimitsu Goto
Sorry, I can't share. I'm not allowed to share more. Forgive me. But I don't think it's far away, when you get more information,
Unidentified Analyst
Question is for Navneet about Vision Fund investment plans. May I ask how much money is left at Vision Fund to spend? I see in this slide that it -- there's a section in the slide it says total [dry powder to invest in $19 billion plus. Could you clarify what this figure is? Thank you.
Navneet Govil
Yes, thank you for the question. So the $19 billion figure covers Vision Fund 1, Vision Fund 2, and the LatAm Funds. For Vision Fund 2, the total commitments are $60 billion. And as you see, and the acquisition cost is $51.5 billion. So we have over $8 billion of available capital in Vision Fund 2, to invest.
Unidentified Analyst
Thank you. And sorry, could you also elaborate maybe a little bit on the pace of investments going forward, since you've started investing now? Thank you.
Navneet Govil
Sure. As Goto-san showed in one of his slides, the pace is definitely increasing, given Son-san’s, comments, at the June shareholder meeting that we're going into offense. And you can see, in the June quarter, we spent close to a billion dollars of investing in Vision Fund 2, so it's more than the prior quarters. But at the same time, the bar for investing is very high, there has to be investments that meet our targeted threshold. And they have to be companies that are focused on next generation AI with high growth potential.
Operator
Thank you. Other questions? Then I’d like to take a question from the black jacket person please in the front row.
Unidentified Analyst
My name is Yamaguchi from Mainichi Newspaper. So back in May, S&P announced the downgrade on you. And can you give us any comments about that? And another question is about, Arm valuation has been increasing. But how you compare with other peers? Why did you make up the valuation please?
Yoshimitsu Goto
Yes, the first question, Arm valuation. Sorry, the first question about the credit rating of the S&P. So that's up to the rating agency to provide the rating index, but this time, their highlight or the interpretation is different from what we understand. And that has something that we did not agree and that we've been keeping a dialogue with S&P simply but asset, amongst the assets or the asset diversification. They see -- S&P sees negatively if we have a ratio of 50% below for the public securities among our net assets. Because we have monetized Alibaba share and that become cash. And cash I thought is safer than public securities. That's my questions that are given to them.
In their asset valuation value does not have cash item. So that I think there are many ways to understand the company, but we have about ¥6 trillion of the cash with us. So that -- it’s not that we have to or we’re forced to sell the securities to put the money but we just tried to get safer by divesting the Chinese assets, for example. Therefore, that we believe this is something that we are not forced or anything but just trying to avoid the risks after the events of the downgrade, we've been keeping the communications and dialogue with the senior members of the agency.
Next day have that announcement of downgrade, actually many of the credit analysts issued reports and made the comments that they agree with our interpretation, which was a very good news or the good to report, but we don't want to make any misunderstanding in between two parties so that we would like to keep the good dialogue with the company.
And for your next question the valuation of the Arm, Navneet?
Navneet Govil
So as Goto-san said, we cannot comment too much on Arm, given the quiet period. But in terms of the Arm valuation, just like all of our portfolio companies, we look at a number of factors. We look at the multiples of comparable companies. So the comparable companies to Arm, their multiples have expanded, and then the performance of Arm, it has shown very strong top line growth as well as EBITDA performance. So in light of that, we took a small markup on the Arm valuation in the June quarter.
Operator
Thank you very much. Any more question from the floor?
Unidentified Analyst
Ohno from Yomiuri Newspaper. Going forward, what's your view Goto-san, I understand your view in short-term but going forward, risk environment and market trends and also Arm IPO, which should come sooner rather than later. You indicated, once Arm is listed, you expect increase in valuation. So again, all-in-all, what's your view going forward?
Yoshimitsu Goto
As an investment company, for our stakeholders, we should do what we need to do for those stakeholders. From that perspective, for example, an event of Arm IPO, if it takes place soon and if everything goes smoothly and Arm values go up, and we have more room for investment. And with that capacity, how much we can invest in a safe manner, we should have more than such money. Of course, we need to fulfill our accountability, at the same time we need to do execution. We need to look at the good side and bad side of environment. For example, Nikkei average is ¥32,000, which is comfortable for us, but of course, we need to keep watching how the stock market goes to make sure that we are ready for any contingencies.
How much sensitivity should we have? And how much safety net we should have? And then how much can we invest? We are going into positive cycle. And of course we want to have -- keep having offensive mode but also we need to be defensive as well for some time. At certain point, we may take a different stance but for the time being, we don't think I'll be sure to change our policy drastically.
Operator
Any other questions? Then we would you like to take a second row from the front, the gentleman please?
Unidentified Analyst
Matsuzawa from Mainichi Newspaper. On the Page 9 of financial report that I would like to have more color. Page 9 of financial report in the middle holding company business loss, second column T-Mobile share, you have a right to purchase the shares and the loss is ¥1,053. You have a right to purchase in free, but you have loss recording here and that's derivative, I understand, but can you give us a little bit more color on this?
Yoshimitsu Goto
Yes. So, for this option is, every quarter real value and the fair value basis and it’s been cumulated already. So, simply put, compared to the previous quarter, this quarter share price has declined as a result, valuations has decreased. The value has decreased and the options right is -- the condition is $150 [indiscernible] 45 days. So, once that, you see the decline of the share price in the value is going to decrease as well. So, it's a kind of a period during this quarter that when you see the share price down then that the value is decreased as well. So, that is why that record loss this time.
Unidentified Analyst
Then it says you have a right to obtain or acquire but do you need to acquire?
Yoshimitsu Goto
We have a right to be able to receive in free. So that, if the -- once that our condition is achieved, we have right to acquire this much of the shares in free.
Unidentified Analyst
So this writing in financial report, there are some other writing as well. Page 25, it says certain conditions, is this same thing?
Yoshimitsu Goto
No that's different things. That potion is a contingent value right, that's different thing than that one. So that's separate.
Unidentified Analyst
Thank you then Page 59, in the middle, so the fair value of contingent consideration is what you have said about the right and also after then, on what page that you have a footnote on that. I couldn't find the page of the financial report? A footnote, fair value of contingent consideration details is, need to refer to bucket of two and I couldn't find that bucket.
Yoshimitsu Goto
Let me, let me come back to you with the pages, number pages.
Unidentified Analyst
What I didn't understand is, in free you can acquire those shares in free but still you’re recording loss this much. In every quarter you recording, so that the -- although that you’re acquiring in free but you have recording loss for that much, that's your explanation?
Yoshimitsu Goto
Every quarter we value, we take the value and sometimes value increase sometimes decrease and this time recording those because of that, thank you.
Operator
Thank you. Any more question from the floor? So, we are going to take the last question from the floor now, Morita from Toyo Keizai.
Unidentified Analyst
I have just one question, any relationship between the latest investments versus investment policy? For example, in logistics, three companies in logistics and tractable AI powered. We will review policy. So I wonder if, of course you want to have defense and offense in terms of financial policy but when it comes to investment, do you still being aggressive or more conservative.
Yoshimitsu Goto
Financially, yes, we want to be defensive as well as offensive. We have for example Investment Committee; we have period discussions at the Investment Committee. So, three years ago, for example, at Investment Committee, a discussion was probably focusing on speed. And maybe now is the time when we should have, take a look at more in details. And focusing on AI is something that we value this time. In the past, we may say that we invest in AI.
Unidentified Analyst
But there are some companies that are not really doing AI thing from your perspective. When it comes to investment stance, what's changed? What, if any, if you have changed any investment stance?
Yoshimitsu Goto
I agree with Goto-san. You mentioned tractable, we're very excited about that investment. It is definitely leveraging AI to make better decisions with respect to vehicles. So it's not necessarily a focus on logistics or any particular sector. The focus is really on mid-to-late stage next generation AI focused companies with high growth potential at valuations that we believe are attractive.
Unidentified Analyst
Thank you very much. So at the moment, policy remains the same but Goto-san, you make sure that you focus on AI, with more attention to details?
Yoshimitsu Goto
Yes, yes, thank you.
Operator
Thank you very much. Next, we would like to take questions from zoom participants. [Operator Instructions] And now we would like to ask Mr. Nakagawa from NewsPicks, please ask your questions.
Masahiro Nakagawa
Yes, this is Nakagawa from NewsPicks. Can you hear me okay?
Yoshimitsu Goto
Yes, please go ahead.
Masahiro Nakagawa
Thank you. Vision Fund, one questions for the Vision Fund, is the commitment total amount -- funds to commitment total in the previous earnings $56 billion, and this time $60 billion. So that looks like commitment amount has increased. So about $4 billion has increased? What is the background for increasing this amount? And also, you've been running some restructures in the fund as well, and the headcounts after the restructure has that been stays the same, but still start restart investment activities? That's my first question.
And for the second question, robotics or in the logistics that you mentioned earlier, so there are three companies you gave us as an examples for the investments. And I believe this came from the SBG’s investments, I’d like to ask Goto-san about this. But you have invested in logistics robotics, quite a large about a billion kind of size and any kind of common backgrounds for those three companies for the investments?
Yoshimitsu Goto
Yes, thank you. So first questions regarding Vision Fund, that commitment amount increase, yes, amount has increased a bit here. But the Vision Fund 2, actually we don't set any upper limit for the commitment yet. So that when we see any new pipelines, and when we see more and more pipelines comes in, then we would like to flexibly increase so that you may see the same kind of trend in the future again, and for the restructurings and the impact or the investment policy, Navneet, would you please cover that?
Navneet Govil
So you're correct, that we've had two rounds of restructuring. One was in September of ’22 and then we had another one in the June quarter. We now believe we are right sized the organization for the investment opportunities that we see ahead. And this is the right size of the organization both on the investing side and the functions.
Yoshimitsu Goto
For the next question, logistics area, it's not that we especially looking into logistic areas and forecast and look for the potential companies or anything like that. But actually when we see the growth of the business in AI is and so on, especially for the Symbotics and Berkshire Grey, we have already invested in those companies in the past. And now that we see that the more deeper understanding of such companies in this AI introduction trend, then that we believe we would like to have, we wanted to have good communication with the management of those two, and decided to have investments in those two companies.
So that, once again, it's not that we're limiting ourselves to this sectors or area. There are many other pipelines in other areas as well for the coming quarter. So over the years, that way you would like to access and look for the good companies for the AI companies, and every time when the time comes that we would like to update you.
Masahiro Nakagawa
Yes, thank you very much.
Operator
Thank you very much. In the interest of time, that was the last question we take, this time. Again, thank you very much. This concludes the SoftBank Group Corp. earnings result briefing for the three months period ended June 30 2023. The video footage of this briefing will be uploaded on our corporate website.
Thank you very much once again for joining the SoftBank Group Corp. earnings results briefing for the three months period ended June 30 2023.
For further details see:
SoftBank Group Corp. (SFTBY) Q1 FY2023 Earnings Call Transcript