Snapdeal is on a rocky path to attain profitability. The company in a recent statement confirmed that it will be ‘rationalising part of its workforce’ on its way to becoming a profitable entity in the next two years. This includes the workforce at Snapdeal, FreeCharge, and Vulcan Express.
According to multiple sources close to the development, the company has received orders to eliminate about 600 people from its workforce, in its exercise of cost-cutting. As per a source close to the development, the employees that have been fired have been provided 3 months severance pay.
A Snapdeal spokesperson said, “On our journey towards becoming India’s first profitable e-commerce company in two years, it is important that we continue to drive efficiency across all parts of our business, which enables us to pass on the value to our consumers and sellers. We have realigned our resources and teams to further these goals and drive high-quality business growth.”
The management has also sent an internal mail, communicating that the founders Kunal Bahl and Rohit Bansal have conveyed their intent to take a 100% salary cut. The mail states
“As part of our overall path to profitability plan that is currently in full swing, we will be reorganising the company into a lean, focussed, and entrepreneurial one. We are combining teams, reducing layers, eliminating non-core projects and strengthening the focus on profitable growth. Sadly, we will also be saying really painful goodbyes to some of our colleagues, in this process.This is by far the hardest decision that we have ever taken in our lives. Our colleagues are our friends before they are co-workers, and I feel a deep sense of disappointment that we won’t be able to have them continue on this journey with us. We will do what we can to help them with their transition to their next opportunity. We take this time to express our sincere gratitude to all those who are leaving us – your contributions have helped build Snapdeal in ways big and small.”
The mail goes on to say, “We believe that every resource of the company should be deployed for driving us towards profitable growth and with this announcement, both Rohit and I (Kunal) are taking a 100% salary cut. Many of our leaders have also stepped up proactively and offered to take a significant cut in their compensation, which is an excellent sign of how galvanised the team feels in this shared quest for profitability.”
Funding Woes
As per recent RoC filings of Jaspers Infotech Pvt. Ltd (parent company of Snapdeal), the ‘Salaries and Wages’ expense has increased from $33 Mn (INR 222.6 Cr) in 2015 to $113.4 Mn (759.8 Cr) in 2016. The loss for FY2016 was about $495 Mn (INR 3315.5 Cr) as compared to $198.2 Mn (INR 1328 Cr) in 2015.
During its journey the homegrown ecommerce giant has raised about $1.76 Bn funding in 12 rounds. The most recent investment came in August 2016 from Luxembourg-based firm Clouse SA, that invested another $21 Mn. This was a part of the same round where Snapdeal raised $200 Mn funding in February this year. The new round in February valued the company somewhere between $6.5-$7 Bn.
Snapdeal was valued at $5 Bn during its funding round in August 2015, where it had raised $500 Mn from Alibaba Group, Foxconn Technology Group and Softbank.
The rebranding exercise it undertook prior to the festive season, where it invested $30 Mn to rebrand and change its logo, the internal communication was, to concentrate on increasing the GMV on the platform. A sharp rise in GMV can help boost the valuation of a company.
In November 2016, Softbank Group Corp, which has the highest holding in Snapdeal (about 32%) marked down close to $555 Mn in two of its Indian investments, cab hailing firm Ola and ecommerce marketplace Snapdeal, as per its six monthly earnings report, ending September 2016.
However in December Snapdeal’s talk with Alibaba to buy Snapdeal, fell apart. Later Softbank had written off around $475 Mn in its combined shareholding value in Ola and Snapdeal, for the period ending December 31, 2016.
Exits
Earlier today, reports surfaced that FreeCharge CEO Govind Rajan has resigned. Govind joined Freecharge in August 2015. He replaced Kunal Shah as the CEO in May 2016. The reason for his exit is undisclosed.
In November 2016, Vijay Ghadge, COO at Snapdeal’s in-house logistics arm Vulcan Express Pvt. Ltd, quit the company, just four months after joining the firm. Prior to this, Sandeep Komaravelly, the Senior Vice President for Shopo, resigned in January 2017. Followed by Abhishek Kumar, Head of Corporate Development who was responsible for fundraising activities in the company; and Tony Navin, Head of Partnerships and Strategic Investments.
