Is Snapdeal getting merged? Is deal finalised? At what valuation Flipkart is going to acquire Snapdeal? These are the few questions which are currently buzzing around. Snapdeal, a homegrown e-commerce giant is today for sure has become the talk of the town. Once known as one of India’s first unicorns is now becoming India’s first unicorpse startup a.k.a dead unicorn which is ready to be cremated. For unawares, a Unicorpse is a former unicorn, now valued at less than $1 billion.
All the while, despite all the troubles, Snapdeal has its own story to tell.
A Quick Flashback
Founded in February 2010 by Kunal Bahl and Rohit Bansal, Snapdeal has come a long way since its inception. While establishing its footprint in the market and competing against the e-commerce biggies like Flipkart, Snapdeal has acquired about 13 startups which include big names like Freecharge, Exclusively, GoJavas, Rupee Power to name few.
Talking about the funding, during the course of its journey, Snapdeal has raised about $1.76 billion in 12 rounds of funding. Out of these the most recent investment came in August 2016 from Luxembourg-based firm Clouse SA, that poured in another $21 million which valued the company somewhere between $6.5-$7 billion.
In August 2015, Snapdeal was valued at $5 billion when it had raised $500 million from Alibaba Group, Foxconn Technology Group and Softbank. However, Snapdeal’s biggest round of funding came in October 2014, when SoftBank invested $ 627 million. Not only this, In August 2014, Ratan Tata also made a personal investment in the e-commerce giant.
Apart from these well-known investors, Snapdeal’s other bunch of investors includes eBay, Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital and Saama Capital, Temasek, BlackRock Inc, Myriad, Premji Invest and Tybourne and IndoUS Venture Partners.
The online retailer claimed to have an assortment of 65 Mn plus products across 1000+ categories from over 125,000 regional, national, and international brands and retailers. It has over 300,000 sellers and delivers to 6000+ cities and towns in India.
If everything sounds so good then what went wrong? From where the downfall started?
From A Unicorn To Unicorpse
The e-commerce firm has been in the news for quite some time for bleeding losses and more. In November 2016, Softbank Group Corp, which has the highest holding in Snapdeal (about 32%) marked down close to $555 Mn in two of its Indian investments, cab hailing firm Ola and Snapdeal. In February 2017, it was reported that Softbank had registered a whopping $350 million in losses from its investments in two of the Indian startups, Snapdeal and Ola. Later, In the same month, the company fired about 600 people from its workforce, in a cost-cutting exercise. Not only this, it also stopped the incentive programme for customers that was previously launched through affiliates.
For Snapdeal trouble doesn’t stop here. Later in 2017, a group of online sellers had requested commerce minister Nirmala Sitharaman to safeguard their money that Snapdeal owed them, in the form of outstanding dues. Later, the Union Minister of State, Commerce & Industry (I/C) intervened in the situation and stated that she will look into the matter and inquire into vendors’ complaints of default payments by Snapdeal.
While Snapdeal is fighting to survive in the competitive market by raising funds, its home-grown competitor Flipkart has closed $1 Bn round at a valuation of $10 Bn from undisclosed investors.
Now What Future Holds For It
After bleeding losses and trouble, Snapdeal is finally news for its merger. In March 2017 it was reported that SoftBank is facilitating a merger between Snapdeal and Flipkart, and is likely to invest $1.5 billion into a joint entity with a roughly 15 percent stake. SoftBank was trying to strike a deal to sell Snapdeal to Flipkart was in talks with Tiger Global to merge the Gurgaon-based marketplace with Flipkart. However later on sources revealed that deal could go either way — Snapdeal getting merged either with Flipkart or Paytm.
After 3 months-long deliberations that included more than 15 board meetings and a giant payout of at least $210 million, Japanese internet and telecom giant Softbank has finally made up its mind to merge its biggest Indian asset Snapdeal with e-commerce giant Flipkart. But still there is a bump in the road. As per the people familiar with the deal, the merger still requires a go-ahead from two of India’s most powerful businessmen magnets, Ratan Tata and Azim Premji.
The final deal has ended up valuing Snapdeal at around $1 billion, which is a major fall from its $6.5 billion last year. If sources to be believed, Snapdeal’s co-founders, Kunal Bahl and Rohit Bansal, who hold approximately 6.5 percent together in the company, can be expected to get richer by a whopping $60 million when the merger comes through.
Now time will only tell, whether this merger will give a major push to the current cut throat competition going on between Jeff Bezos’ Amazon and India’s very own homegrown e-commerce leader, Flipkart or not.