Troubled e-commerce marketplace Snapdeal, which was contemplating a merger deal with Indian ecommerce leader Flipkart for the last 3-4 months finally announced its decision to dump Flipkart's second buyout offer yesterday and try workout things on its own for sometime.
Not only has the company dropped its merger plans altogether, its founders Kunal Bahl and Rohit Bansal are now boosting that the company will come out of the troubled reputation it has acquired for last few years and earn a gross profit of whopping Rs 150 crore in next one year.
The development comes on the heels of Snapdeal selling its digital payments platform Freecharge to Axis Banks for a whopping Rs 385 crore. Snapdeal founders are confident that the cash inflow from the deal can give Snapdeal the much needed breather it required to survive on its own, at least for a while. In fact, in order to smooth things out for the company and make the capital survive a little longer, the ecommerce firm has decided to lay off close to 80 percent of its workforce. At present, Snapdeal has about 1,200 employees. If the Gurgaon-based firm goes through with its decision, it would be left with about 200 employees only.
Snapdeal's decision to run on its own didn't come as surprise to many in the Indian ecommerce sector as there were signs right from the beginning that the founders of the company weren't interested in negotiating a deal with one of their rival firms, Flipkart.
The troubled e-commerce player received a total of two offers from the Indian ecommerce leader Flipkart for an all-stake acquisition in July. Snapdeal rejected Flipkart's initial $850 million buyout offer as Snapdeal’s board felt that the offer made by the ecommerce leader undervalued their company. Flipkart then made a second offer of around $900 million-$950 million, but that also didn't tempt the Snapdeal board and founders as the offer was still below their expectation of $1 billion.
It was also revealed that the negotiation between the two ecommerce players had hit a roadblock not just on the financials of the deal, but the Snapdeal board was also not happy with the term sheet furnished by Flipkart as it was laced with a lot of 'hold backs' and 'clauses.'
Reportedly, Snapdeal also received a merger offer from Ahmedabad-based Indian internet and e-commerce conglomerate, Infibeam on the table. Though Infibeam founder and MD Vishal Mehta had denied that any offer has been made but as we know there's no smoke without fire. According to media reports, Infibeam had even furnished a term sheet for the deal, which has valued Snapdeal at USD 1billion, which was the initial asking price asked for the e-commerce marketplace.
It was revealed that the founders of the cash thirsty ecommerce firm were leaning more towards the Infibeam merger offer as not only is the price good but they will also get to retain their positions even post the acquisition which is something Flipkart wasn't open to negotiating. But, it seems, FreeCharge sale quenched Snapdeal's cash thirst and the company decided to give its solo journey another try.
In a joint letter to the employees of the firm, the Snapdeal founders wrote, "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."
Announcing the launch of Snapdeal 2.0, the letter added, "...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."
Not only has the company dropped its merger plans altogether, its founders Kunal Bahl and Rohit Bansal are now boosting that the company will come out of the troubled reputation it has acquired for last few years and earn a gross profit of whopping Rs 150 crore in next one year.
The development comes on the heels of Snapdeal selling its digital payments platform Freecharge to Axis Banks for a whopping Rs 385 crore. Snapdeal founders are confident that the cash inflow from the deal can give Snapdeal the much needed breather it required to survive on its own, at least for a while. In fact, in order to smooth things out for the company and make the capital survive a little longer, the ecommerce firm has decided to lay off close to 80 percent of its workforce. At present, Snapdeal has about 1,200 employees. If the Gurgaon-based firm goes through with its decision, it would be left with about 200 employees only.
Snapdeal's decision to run on its own didn't come as surprise to many in the Indian ecommerce sector as there were signs right from the beginning that the founders of the company weren't interested in negotiating a deal with one of their rival firms, Flipkart.
The troubled e-commerce player received a total of two offers from the Indian ecommerce leader Flipkart for an all-stake acquisition in July. Snapdeal rejected Flipkart's initial $850 million buyout offer as Snapdeal’s board felt that the offer made by the ecommerce leader undervalued their company. Flipkart then made a second offer of around $900 million-$950 million, but that also didn't tempt the Snapdeal board and founders as the offer was still below their expectation of $1 billion.
It was also revealed that the negotiation between the two ecommerce players had hit a roadblock not just on the financials of the deal, but the Snapdeal board was also not happy with the term sheet furnished by Flipkart as it was laced with a lot of 'hold backs' and 'clauses.'
Reportedly, Snapdeal also received a merger offer from Ahmedabad-based Indian internet and e-commerce conglomerate, Infibeam on the table. Though Infibeam founder and MD Vishal Mehta had denied that any offer has been made but as we know there's no smoke without fire. According to media reports, Infibeam had even furnished a term sheet for the deal, which has valued Snapdeal at USD 1billion, which was the initial asking price asked for the e-commerce marketplace.
It was revealed that the founders of the cash thirsty ecommerce firm were leaning more towards the Infibeam merger offer as not only is the price good but they will also get to retain their positions even post the acquisition which is something Flipkart wasn't open to negotiating. But, it seems, FreeCharge sale quenched Snapdeal's cash thirst and the company decided to give its solo journey another try.
In a joint letter to the employees of the firm, the Snapdeal founders wrote, "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."
Announcing the launch of Snapdeal 2.0, the letter added, "...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."
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