Snapdeal to merge with Flipkart? E-retailer faces uncertain future; here’s why

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Published: April 5, 2017 6:30:17 AM

With investors in Snapdeal reportedly differing on the future course of action at the cash-strapped e-retailer, a four-hour board meeting of the company on Tuesday failed to throw up a concrete plan.

Snapdeal, e-retailer, online shopping, Retail, Flipkart, SoftBank, Kalaari Capital, Nexus Venture Partners, rival e-retailers, online shopping, mergers, registrar of companiesWith investors in Snapdeal reportedly differing on the future course of action at the cash-strapped e-retailer, a four-hour board meeting of the company on Tuesday failed to throw up a concrete plan. (Source: Reuters)

With investors in Snapdeal reportedly differing on the future course of action at the cash-strapped e-retailer, a four-hour board meeting of the company on Tuesday failed to throw up a concrete plan. While a proposal to merge Snapdeal with rival Flipkart is understood to have been favoured by the main investor, SoftBank, others are believed to have opposed it. It is not known whether investors such as Kalaari Capital and Nexus Venture Partners were altogether opposed to a merger of Snapdeal with a rival e-retailer or whether it was the share swap ratio was not acceptable to them.

One source privy to the development explained a merger could involve both cash and a share swap. Tiger Global, the promoter of Flipkart, he said, may receive some amount in cash from SoftBank. The swap ratio being talked about is 1:10 in favour of Flipkart.  In response to a query, Snapdeal said no final decisions had been taken at Tuesday’s meeting but several options had been discussed. Kalaari Capital and Nexus Venture Partners did not reply to queries till the time of going to print. A spokesperson for SoftBank declined to comment.

SoftBank, which has a 30% stake in Snapdeal, is believed to have recently agreed to inject $100 million into the company as an interim measure. A term sheet had been finalised for a $15-million infusion every month for the next six to seven months. However, according to media reports, the term sheet has been withdrawn by SoftBank. With losses spiralling, Snapdeal, it is understood, is currently left with around Rs 500-550 crore in the bank. The e-retailer is believed to be losing Rs 50-60 crore every month, according to investors in the company, though these numbers could not be verified.

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According to the filings with the registrar of companies (RoC), Snapdeal had Rs1,072.2 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.

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