Is Nikesh Arora’s Fast Rise at SoftBank Poised for Premature End?

SoftBank’s second-in-command faces criticism for “poor investment performance and questionable transactions”.

Entrepreneurs and the media had many reasons to celebrate Nikesh Arora, the India-born president of SoftBank – most of SoftBank’s investments in India happened after he joined the group in July 2014. But the man may have run into troubled waters.

In a critical 11-page letter, some investors have called upon SoftBank’s board to “investigate and possibly dismiss Arora”, according to a Bloomberg report. In the letter which has not been made public, his track record and qualifications as president of the company have come under the scanner.

The Bloomberg report suggests that investors have questioned whether Arora “has conflicts of interest due to his existing role as a senior adviser to the private equity firm Silver Lake. It also suggests he may have been involved in past wrongdoing and generally poor business decisions.”

Arora has also faced criticism for allegedly “poor investment performance and a series of questionable transactions” during his tenure.

Arora Runs Into Rough Weather

• Potential conflicts of interest due to Arora’s existing role as a senior adviser to the private equity firm Silver Lake.
  
• Some investors allege he may have been involved in past wrongdoing and generally poor business decisions.
  
• Arora faces criticism for allegedly “poor investment performance and a series of questionable transactions” during his tenure.
  
• SoftBank’’s India investments during Arora’s tenure include housing.com, OYO Rooms and Grofers - all of which have proved troublesome.
  

SoftBank, known for some high-stakes investment decisions like in China’s Alibaba, has made a string of not-too-promising ventures in India.

1. Housing.com: Just three months after SoftBank’s first investment in Housing.com, in December 2014, the startup spent over Rs 120 crore on a marketing drive. The cash-burn evoked criticism and the company posted huge losses for fiscal 2015. The startup was mired in controversies involving its co-founder Rahul Yadav who was finally fired from his own company.

2. OYO Rooms: SoftBank led a $100-million investment round in the then two-year-old budget hotel rooms aggregator in August 2015. The startup’s 22-year-old founder and CEO, Ritesh Agarwal, has been widely celebrated as one of country’s youngest entrepreneurs. But in January 2015, an investigative report in Mint exposed several incidents that reflected poorly on OYO Rooms. The report said that Agarwal had made false claims on his resume and even wrongfully dismissed a co-founder.

3. Grofers: SoftBank invested $120 million in the on-demand groceries delivery startup in November 2015. The company reportedly shut operations in nine cities in January, saying its business in these cities was not growing as expected.

SoftBank called the letter “unsubstantiated allegations” from “unidentified shareholders” though the board will review the letter. Arora himself said he has been careful to share any information that would present a potential conflict. He also said he may end his advisory role at Silver Lake when his contract expires.

I think my track record speaks for itself. Since my time at SoftBank, the last 18 months, I always strived to put the company first and I think none of the comments have any substantive bearing in fact.