Snapdeal’s Shift In Strategy Pays Off, Trims Losses By 87% In FY18

Snapdeal is back on track. In FY18, the company trimmed its losses by 87%, recording a loss of $84.7 Mn (INR 613 Cr) in comparison to $642 Mn (INR 4,647.1 Cr) in FY17, on a consolidated basis, as it scaled down operations and offloaded its payments and logistics units.

According to the company’s filing with the Registrar of Companies (RoC), the ecommerce company reported total income including revenue from operations of $71.3 Mn (INR 514.5 Cr), down from $152.9 Mn (INR 1,105.7 Cr) in FY17.

The drop in revenue is said to be on account of the recent change in company’s strategy where it shifted from premium branded products to seller-branded products.

Also, earlier in July this year, Snapdeal claimed to be cash flow positive as of June 2018, which means the company is now earning money from its business.

Snapdeal has been going through a troubled state when it called off a merger with Flipkart last year. Since then the company has seen frequent office changes, bursts of hirings alternated with layoffs, and investors writing down their investments in the company. In May, it was even dragged to the courts by some of its sellers over alleged non-payment of dues.

Snapdeal’s Revival Of Fortunes

After selling all its subsidiaries including Vulcan Express, Unicommerce and Freecharge, Snapdeal got enough capital to reign in its costs and use the money to focus on its ecommerce business.

As Snapdeal cofounder Kunal Bahl said in one of his earlier blog posts, “The FreeCharge sale was an important part of Snapdeal 2.0 and without that capital, our survival as a company would have been at risk.”

Well, Snapdeal decision seems to have paid off. Post Flipkart’s buyout by global retail giant Walmart, Snapdeal is now the only horizontal ecommerce company at scale left in India that is independent and not owned or operated by a large multinational corporation.

Taking lessons from the past, the Snapdeal founders, are now finding ways to refrain from equity financing and churn revenues inside the company for further scale. Most recently, the company also converted preference shares of all its stakeholders, including SoftBank and Nexus Venture Partners, into equity shares, which as per analysts can be seen as a preparation of a public listing as a simple capitalisation structure is favoured by the market.

To be noted, Flipkart has also given indications to float its IPO in the next three years.