Jasper Infotech-owned online player Snapdeal seems to have found a temporary solution to its problems. Its largest investor, Japan’s SoftBank, is believed to have agreed to infuse close to $100 million into the e-retailer as an interim measure, two investors close to the development said. The longer-term plan is yet to be finalised but may involve a merger between Snapdeal and Paytm’s online marketplace. The e-tailer is understood to have received a term sheet from SoftBank outlining the terms and conditions for the bridge funding. SoftBank is the largest investor in Snapdeal with a little over 30% equity in the firm.
“In the next six to seven months, Snapdeal will receive about $15 million every month from SoftBank. Snapdeal will keep the investor informed about its monthly expenses,” one of the people explained. In an email response, SoftBank said, “We don’t comment on speculation.” Snapdeal did not reply to a query from FE till the time of going to print. With losses spiralling, the e-tailer, it is understood, is currently left with around R500-550 crore in the bank. The e-retailer is believed to be losing R50-60 crore every month, according to investors in the company though these numbers could not be verified.
According to the filings with the registrar of companies (RoC), Snapdeal had R1,072.2 crore as cash and bank balances as on March 31, 2016. Among the investors in Snapdeal are SoftBank, Alibaba, Sequoia Capital, Ontario Teachers’ Pension Plan Board, Starfish I, Kalaari Capital and Bessemer Venture Partners Trust. Since January 2011, Snapdeal has raised $1.75 billion. Losses at Jasper Infotech — the holding company in which Snapdeal is housed — ballooned to Rs 3,315 crore in 2015-16, while revenues came in at Rs1,506.8 crore, RoC data showed. In the previous year the company had posted a loss of Rs 1,328 crore on revenues of Rs 933 crore.
It should be noted that Snapdeal’s founders Kunal Bahl and Rohit Bansal sold 11,462 shares in the firm to Ontario Teachers’ Pension Plan, raising Rs 160 crore in a transaction in late 2015, filings with the RoC show. Snapdeal was valued then at an estimated $6.5 billion. The founders in their personal capacity sold 5,731 shares each, where the value of each share stood at Rs 1.40 lakh, picking up Rs 80 crore each. In February, in an email to employees, Bahl, co-founder and CEO, Snadpeal, said both the founders would take a 100% cut in salaries; last year Bahl and Bansal took home Rs 40 crore each.
The money from the stake sale appears to have been used to invest in other start-ups. Between 2011 and 2016, Bahl invested in as many as 24 start-ups including Ola, Jugnoo, UrbanClap and Razorpay, among others, according to data platform Crunchbase. Bahl and Bansal aren’t the only ones to have profited from the stake sale. According to documents viewed by FE, Kalaari Capital, which invested just $6 million, earned a return on investment of 16.4 times. Similarly, eBay, which invested $33 million in Snapdeal in 2014, made a quick partial exit a year later, pocketing a return that was three times its investment of $100 million.