Snapdeal in talks for fresh funding
Existing investors led by Softbank may infuse around $600 mn as competition in e-commerce heats up
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Snapdeal.com, one of India’s biggest online marketplaces, is in advanced talks to raise more than $600 million in fresh funding from existing investors led by Softbank , according to three people with direct knowledge of the matter.
The new round of fund raising comes around three months after investors including Temasek Holdings Pvt. Ltd, BlackRock Inc. and Premji Invest pumped $100 million into Jasper Infotech Pvt. Ltd, which runs Snapdeal, in May.
The deal is “almost done” and will be announced within a month, said one of the three people, none of whom wanted to be identified.
Snapdeal has already raised $233.7 million this year in two rounds of funding.
Apart from the May round, the company raised $133.7 million from eBay Inc. and others in February; and the remaining $100 million in May.
Softbank could not be reached comment.
Snapdeal’s chief executive officer (CEO) Kunal Bahl did not respond to queries.
Former Tata group chairman Ratan Tata bought a small stake in Snapdeal last month.
Snapdeal’s proposed fund raising follows a mammoth $1 billion fund infusion into bigger rival Flipkart, promoted by Flipkart India Pvt. Ltd.
India’s biggest online retailer said in late July that it received as much as $1 billion in fresh capital, in a round led by existing investors Tiger Global and Naspers.
Soon after Flipkart announced the $1 billion fund raise, Amazon.com Inc.’s chief executive Jeff Bezos announced that the world’s largest online retailer would invest as much as $2 billion into its India business as it aims to become the leader in one of the fastest-growing e-commerce markets in the world and also grow its sales outside of North America.
Flipkart has taken the lead among e-commerce firms in raising money, which is forcing rivals to keep raising huge amounts of capital.
Snapdeal’s fund raise will, in turn, increase pressure on smaller rival Shopclues to raise money.
Flipkart, Snapdeal and Amazon India are engaged in an aggressive and cash-intensive battle to gain customers in India’s fast-growing e-commerce market.
Amazon launched its India marketplace in June 2013 and has quickly expanded its product selection to become the biggest rival to Flipkart and Snapdeal.
Mint reported on 26 June that Amazon had increased the capital it can invest in India to as much as Rs.1,500 crore in December from Rs.200 crore in 2012-2013, citing documents filed with the Registrar of Companies.
India’s e-commerce market, excluding travel services and tickets, is worth $3.1 billion and is estimated to grow to $22 billion in five years, according to CLSA’s November 2013 report.
If Snapdeal closes the proposed new round, it would have raised nearly $1 billion since its inception in 2010.
Delhi-based Snapdeal was co-founded by Kunal Bahl and Rohit Bansal as a daily deals platform, selling coupons to groups of customers (similar to the Groupon model), but converted to a marketplace in late 2011—first offering services and then adding a wide range of products including apparel, books and electronics through the third-party merchants.
A marketplace provides a selling and technology platform to other sellers. Indian law does not allow foreign direct investment (FDI) in e-commerce but allows it in marketplaces.
This has prompted several Indian companies including Flipkart, to move to a marketplace model.
Given India’s restrictive laws on foreign investment in retail, e-commerce provides the only investment option for foreign investors looking to buy into the consumption story in the country.