Having dumped the USD 950-million takeover offer from Flipkart, Snapdeal founders Kunal Bahl and Rohit Bansal today said the online market place can survive on the money made from sale of assets like Freecharge and will make a gross profit of Rs 150 crore in the next 12 months. They also said the company will continue to keep control over costs and make operations efficient.
“We will be continuing the Snapdeal journey as an independent company… after the last few months of tumultuousness, it is time to focus on the business and leverage all our strengths to progress towards our vision of building the best marketplace to connect buyers to sellers in India,” they wrote in a joint letter to company employees. Snapdeal today called off the USD 950 million-takeover (over Rs 6,000 crore) by Flipkart, apparently over differences in valuation and terms of what could possibly have been the largest deal in the Indian e-commerce space.
Discussions to acquire the beleaguered Snapdeal by Flipkart were initiated in March but contours of the deal could not reach a finality even after several rounds. The founders, who started the company in 2010 as a deals website, said the surface of the USD 200 billion e-commerce market has barely been scratched yet. They highlighted that the company has tremendous progress towards the new path over the last few months and is already profitable at a gross profit (net margin) level.
“…with clear visibility to making upwards of Rs 150 crore in gross profit in the next 12 months. Finally, with the ongoing streamlining of costs and sale of some of our assets, such as Freecharge, we are financially self sufficient as a company and don’t need to raise additional capital to reach profitability,” they said.
The founders added that they will “need to keep a tight control on costs and work towards becoming a hyper efficient culture delivering profitable growth, month on month”. There are speculations that the move to continue operations could see large-scale layoffs at the company, which has about 1,200 people. The letter, however, did not mention if Snapdeal will undertake a rationalisation of workforce.
The duo explained that apart from the complexity of executing the proposed deal, there were other reasons why the company decided to pursue an independent path.
“…there isn’t going to be one successful model for e- commerce in India. In every market, there are multiple successful e-commerce businesses, and as long as one’s strategy is differentiated and has a clear path to success, there is a great company that can be built,” they said. They added that through Snapdeal 2.0, the company wants to enable anyone to set up a store online in a few minutes and focus on providing large selection of products at great prices to consumers.