Beleaguered e-retailer Snapdeal said on Monday a proposed deal to merge with rival Flipkart had been called off. The e-commerce firm will, nevertheless, continue to operate as a smaller entity by laying off close to 950-1,000 staffers, company executives told FE. Following the large-scale downsizing, the company will be left with just 200-250 employees, they added. Snapdeal’s losses ballooned to Rs 3,315 crore in 2015-16 on a revenue of Rs 1,506.8 crore, according to filings with the registrar of companies (RoC). At the end of March 2016, it had Rs 1,072.2 crore as cash and bank balances.
In a transaction in late 2015, founders Kunal Bahl and Rohit Bansal sold 11,462 shares in the firm to Ontario Teachers’ Pension Plan, raising Rs 160 crore, filings with the RoC showed. At the time Snapdeal was valued at about $6.5 billion. The founders sold 5,731 shares each, in their personal capacity, where value of each share stood at Rs 1.40 lakh, picking up Rs 80 crore each. The Tiger Global-backed Flipkart’s buyout of Snapdeal is believed to have failed because Bahl and Bansal did not want to sell out at Flipkart’s valuation of $850 million for the firm. The price was, however, acceptable to other investors, sources said, adding there were also disagreements over the non-compete clause.
In a letter to employees, Bahl said Snapdeal 2.0 was expected to be profitable soon. “We are already profitable at a gross profit level … with clear visibility to making upwards of Rs 150 crore in gross profit in the next 12 months,” Bahl wrote. “Snapdeal has been exploring strategic options over the last several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result,” a company spokesperson said in a statement, without naming Flipkart. Japanese conglomerate SoftBank, which holds close to 33% in Snapdeal and was driving the discussions with Flipkart, said on Monday it supports entrepreneurs and their vision.
“Supporting entrepreneurs and their vision and aspirations is at the heart of Masayoshi Son’s and SoftBank’s investment philosophy. As such, we respect the decision to pursue an independent strategy. We look forward to the results of the Snapdeal 2.0 strategy, and to remaining invested in the vibrant Indian e-commerce space,” a SoftBank spokesperson said. Bahl added that with the ongoing streamlining of costs and sale of some of its assets such as Freecharge, Snapdeal is financially self sufficient as a company and doesn’t need to raise additional capital to reach profitability. Bahl and Bansal together own a 6.5% stake in Snapdeal, while Kalaari Capital owns less than 8% and Nexus Venture Partners’ about 11%.Snapdeal last week sold its mobile wallet Freecharge to Axis bank for `385 crore in an all-cash deal. Additionally, it is understood that Snapdeal plans to sell its logistic arm Vulcan Express for `100 crore.