New Delhi, July 31: Snapdeal Monday 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 beleagured Snapdeal by Flipkart were initiated in March but contours of the deal could not reach a finality even after several rounds.
“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 Snapdeal spokesperson said in a statement, without naming Flipkart.
The spokesperson added that the company will now pursue “Snapdeal 2.0” which is expected to help Snapdeal be “financially self-sustainable”.
Japanese conglomerate SoftBank, which holds close to 35 per cent stake in Snapdeal and one that was driving the discussions, said it supports entrepreneurs and their vision.
“…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.
According to company sources, the talks ended on account of the complexity of the deal that came with multiple conditions, right from indemnity to a non-compete clause.
These did not find favour with the founders of the Gurugram-based online marketplace, they added.
The sources did not wish to be named as the discussions were private. The deal was also contingent upon a nod from Snapdeal’s high-profile minority investors, including Ratan Tata and Azim Premji’s investment arm, PremjiInvest.
It wasn’t immediately clear if any of the minority shareholders had objected to the deal.
Once a leading player in the Indian e-commerce space, Snapdeal has seen its fortunes falling amid strong competition from rivals, Amazon and Flipkart.
Its valuation plunged from a peak of about USD 6.5 billion in February 2016 to about USD 1 billion during the latest round of discussions.
India’s nascent e-commerce sector is witnessing an intense battle for leadership between US-based Amazon and homegrown firm, Flipkart as more Indians turn to online shopping.
The players have been pumping in millions of dollars in building infrastructure, getting sellers online as well as promotions to bring more shoppers onboard. Snapdeal has about 1,200 employees.
Founders pin hopes on Snapdeal 2.0
Having dumped the USD 950-million takeover offer from Flipkart, Snapdeal founders Kunal Bahl and Rohit Bansal Monday 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.
Massive layoffs ahead
E-commerce major Snapdeal Monday revealed that it is facilitating a major layoff in the company, with an agenda to cut down 80 per cent of its employee strength. A senior official of the company was reported by the media as saying the management has given verbal instructions to their department heads to prepare the list. In July last year, the company had over 9,000 employees. However, the management cut down the talent pool down to 1200, without any notice. According to sources, from last Thursday evening, Kunal Bahl and Rohit Bansal have firmly instructed their business and technical heads to restructure their teams and begin the paperwork for their layoff.
