Early consolidation kills value: Snapdeal founder

Written by Anand J | Sayan Chakraborty | Bangalore | Updated: Apr 11 2014, 01:20am hrs
For an industry growing at a double-digit rate every month, with a lot of headroom for growth, mergers and acquisitions can wait, says Kunal Bahl, co-founder and CEO of Snapdeal, the country's leading e-commerce marketplace.

Consolidation kills value for investors. It is too early. There is too much headroom for growth in the industry for consolidation right now. Mergers and acquisitions kill value at some company and, in an industry growing at this pace, it is not a good thing to do, Bahl told FE in the wake of reports hinting at consolidation in the sector.

He added that certain companies are thinking of taking the M&A route because they have burnt more cash than they should have.

Bahl said he was confident of Snapdeal achieving $1 billion in sales before 2015, his original target to accomplish the feat. If we get there before the end of the year, we would have done it in a third of the time taken by our peers, and spending a fifth of the money they spent, he said.

Bahl said Snapdeal is not considering mergers and acquisitions as there is nothing to be bought at the moment. You can only buy demand, supply and technology. We already have enough demand, he said.

Besides, getting listed in the US is very much on Snapdeal's agenda. Never say never. Given our rapid increase in size, an IPO is a likely option, Bahl said. From a scale perspective, Snapdeal is equipped to go public this year. But Bahl does not see it happening until 2015, given the procedure would require an extended period of readiness. The company needs to be ready, a board has to be in place and the market has to be in good shape, Bahl said.

The Wharton graduate said Snapdeal will focus on sustainable growth in sales and enhancement of buyers and sellers experience. Snapdeal will also invest heavily in technology, particularly in areas like personalisation and recommendation, which form a third of the total sales, seller tools, logistics and supply chain and mobile. Bahl says Snapdeal receives 40% of its orders on the mobile app, up from a meagre 5% a year ago.

Bahl is open to acquiring products from Indian start-ups to augment Snapdeal's technological capabilities. If it is something non-core, you can use a software built by someone else. But for core areas like analytics and personalisation and recommendation, you should built it yourself, Bahl said.

Snapdeal is planning to extend its 24-hour delivery services beyond Delhi and Gurgaon. Bahl also sees tremendous potential in regional languages.

Besides, Snapdeal is likely to offer its logistics platform, SafeShip, to rival e-commerce companies at a charge. Bahl said around 15 small and medium players have already evinced interest in the product. It's a win-win for all. It helps us because we can handle bigger volumes better. It benefits couriers because it helps in better capacity utilisation. It helps smaller companies because they don't have to worry about logistics, Bahl added.