Amidst bleeding losses, seller issues and acquisition talks, another blow has struck the Snapdeal camp. One of their crucial investors, Softbank, reportedly, has revoked a debt financing offer, as part of a supposed $150 Mn-$200 Mn funding round.
As stated by an ET source, co-investors Kalaari and Nexus have questioned Softbank’s intentions regarding Snapdeal – as Softbank withdrew a term-sheet offering Snapdeal debt financing for a period of three years, suggesting the possible sale of the company.
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).
Earlier, it was reported that Snapdeal has been looking for a buyer to front $1.5 Bn-$1.8 Bn, with Softbank leading discussions for the deal. “SoftBank has been solely fronting all the (sale) conversations till date. The other board members have been pretty much kept out of the loop thus far,” stated the ET source.
The Snapdeal Investors’ Tussle
Softbank, with an investment of around $900 Mn in the company till date, holds around 33% stake. While Kalaari Capital and Nexus own about 8% and 10%, respectively, the founders hold just 6.5% stake.
As per a Mint report, over the past six months, two of Softbank’s investment proposals have been rejected by the other investors on the Snapdeal Board. As cited, further investment by Softbank would result in a significant devaluation of Snapdeal by more than half, leading to a stake increase for Softbank, but a loss for the others. Furthermore, with a loss in shareholding value below 4.75%, Kalaari and Nexus will also lose many of their voting rights in Snapdeal.
This tussle over valuation also pushed eBay India’s business into the hands of Flipkart – a deal which, as cited by Mint sources, was earlier offered to Snapdeal.
Email queries sent by Inc42 to Snapdeal did not elicit a response at the time of publication.
Ongoing Snapdeal Woes
Founded in February 2010, by Kunal Bahl along with Rohit Bansal, Snapdeal claims to offer over 65 Mn products across 1000+ categories. Currently, it claims to have more than 300K sellers on its platform.
The unicorn has, till date, raised about $1.76 Bn funding spread across 12 rounds. The firm was valued at around $6.5 Bn in 2015, post aits fundraise of $500 Mn from Alibaba Group, Foxconn Technology Group, and Softbank. In January 2017, Snapdeal reportedly agreed to raise funds from Softbank at a lower valuation, ranging betweenn, $3 Bn – $4 Bn.
In November 2016, Softbank Group Corp marked down close to $555 Mn in two of its Indian investments, cab hailing firm Ola and Snapdeal.
In February 2017, Snapdeal fired about 600 people from its workforce, in a cost-cutting exercise. In the same month, Snapdeal also stopped the incentive programme for customers that was previously launched through affiliates. Also, the company is struggling to deal with the troubles created by a group of sellers on non-payment of dues over eight months. Last month, reports also surfaced that Snapdeal is planning to give up half of its office space in Gurugram, amidst cost-cutting drive.
While the homegrown ecommerce player is having a hard time, counterpart Flipkart emerged from a prolonged series of markdowns and closed a $1 Bn funding round at a valuation of $10 Bn from undisclosed investors, earlier this month. The round was reportedly led by Microsoft Corp., EBay Inc., and Tencent Holdings Ltd. The company is further looking to raise another $1 Bn by the end of this year.
Recently, it was also reported that Snapdeal’s rivals, Paytm and Flipkart, were in talks to buy the falling unicorn. However, Snapdeal denied these reports. On the contrary, an ET report disclosed that Softbank is in talks with Flipkart to acquire Snapdeal. As said, “The potential contours of that deal could see Softbank pick up a 20% stake in the country’s largest commerce company for about $1.5 Bn, in the process buying out $1 Bn worth of Tiger Global’s holding in Flipkart.”
Softbank, like any prudent marquee investor, is looking to leverage its investment into an advantageous exit. But whether the proposed moves will work out in favour of other investors as well as the beleaguered unicorn remains to be seen.