Last week, it was reported that SoftBank Global gave the final nod on the widely talked about Flipkart and Snapdeal merger. The report stated that the Japanese investor had given an in-principle, non-binding approval for the deal – pending approval from investors and the Board.
The Board was scheduled to meet on Tuesday May 2, 2017 to discuss the final terms. As per an ET report, the board did not reach an agreement on the proposed sale of Snapdeal to Flipkart. A decision could not be taken as the Japanese firm could not manage to convince Nexus Venture Partners on the company’s proposed valuation.
The company’s seven-member Board currently includes SoftBank (holds two seats), Kalaari Capital, Nexus Ventures, Rohit Bansal, Kunal Bahl, and Akhil Gupta (Vice Chairman, Bharti Enterprises).
Last month, it was reported that SoftBank had proposed that Snapdeal’s shareholders will get one share of Flipkart for every 10 shares they own in Snapdeal. Snapdeal’s other backers, including Kalaari Capital and Nexus Venture Partners, have asked for $100 Mn each from the proposed sale.
SoftBank – with an investment of around $900 Mn in the company – holds around 33% stake. While Kalaari Capital and Nexus own about 8% and 10%, respectively. The founders, Kunal Bahl and Rohit Bansal, hold just 6.5% stake.
The sources stated Nexus Ventures is seeking a higher valuation for its stake in Snapdeal.
In April 2017, it was reported that along with trying to offload Snapdeal to Flipkart, SoftBank shifted its focus to sell Snapdeal’s subsidiary FreeCharge too. According to reports, Flipkart-appointed advisor ‘Goldman Sachs began working with Credit Suisse to hammer out the final terms and conditions’ of Snapdeal’s sale.
At the beginning of 2017, Snapdeal co-founders were talking about attaining profitability in the next two years. However, the company has been on a downward spiral ever since. In February, the company fired 600 employees in order to ‘rationalise part of its workforce’ on its way to becoming a profitable entity in the next two years. This included the workforce at Snapdeal, FreeCharge, and Vulcan Express. The company also vacated its 90-seat office at a coworking hub in Andheri in Mumbai.
In March 2017, it was reported that a group of merchants that represents small online sellers reportedly claimed that its members were waiting for their dues to be cleared by Snapdeal. The online marketplace had allegedly not cleared the payments for eight months.
Now, as per a recent report by VCCircle, a Bengaluru-based apparel-seller Rajdhani Cotton has filed a petition against Snapdeal. The report states that a complaint has been filed with the Commissioner of Police, Delhi against Jasper Infotech and its co-founders Kunal Bahl and Rohit Bansal. The complainant has alleged that the ecommerce marketplace owes about $105K (INR 67.6 Lakhs) for business transactions between April 2014 and April 2016 and has withheld payments “in a fraudulent manner.”
Earlier in February 2017, a group of online sellers reportedly asked the Commerce Minister Nirmala Sitharaman to intervene in the matter and safeguard their money that Snapdeal holds in the form of outstanding dues. Later on, in March 2017, Nirmala Sitharaman, Union Minister of State, Commerce & Industry (I/C) stated that she will look into the matter and inquire into the vendors’ complaints of default payments by Snapdeal.