Snapdeal sale to Flipkart hits roadblock as founders want Infibeam buyout
Bengaluru: The board of struggling online marketplace Snapdeal (Jasper Infotech Pvt. Ltd) is again divided about the company’s proposed sale, casting doubt about its future.
Snapdeal co-founders Kunal Bahl and Rohit Bansal are pushing for a sale to Infibeam Inc. or getting Snapdeal to survive as an independent company by cutting both a majority of jobs and the size of its business, two people familiar with the matter said.
Snapdeal’s largest investor SoftBank Group Corp., on the other hand, continues to push for a sale to bigger rival Flipkart, the people said, requesting anonymity.
Infibeam, the only listed Indian e-commerce firm, made an offer of roughly $700 million in stock for Snapdeal last week, they said.
While that is lower than Flipkart’s $850-million bid, Bahl and Bansal are keen on selling the company to Infibeam as they may retain control of Snapdeal in that case, the people said. Whereas, the two entrepreneurs would have to leave Snapdeal if the sale to Flipkart goes through, the people said.
Snapdeal, SoftBank and Infibeam declined to comment.
Since late last year, the Snapdeal founders, venture capital (VC) firms Nexus Venture and Kalaari Capital have been locked in a boardroom battle that resulted in Snapdeal passing up fresh funding deals, cutting jobs and being forced to seek a buyer. SoftBank disagreed with the others over the firm’s valuation in a potential sale or funding round.
The Japanese internet and telecoms conglomerate is keen to sell Snapdeal to Flipkart in order to cut its losses on an investment that has faltered badly. And until last week, a sale of Snapdeal to Flipkart seemed the likeliest outcome even though the proposed deal had been delayed because of differences over valuation and other terms.
Flipkart believed its latest offer of $850 million that was submitted last week would be accepted by Snapdeal. But the Snapdeal founders had approached Infibeam, which made its buyout offer later in the week, the people cited above said.
If a sale to either Flipkart or Infibeam doesn’t go through, Snapdeal will cut a majority of its current jobs, slash the size of its business and try and survive as an independent firm, the people said.
Snapdeal’s already-low cash reserves may get replenished by the imminent sale of its digital payments arm Freecharge.
Freecharge is close to selling itself to Axis Bank Ltd, the people cited above said.
The sale is likely to get finalized by July end, they said.
The future of its parent company Snapdeal, however, is unclear.
Snapdeal, which has raised nearly $2 billion in cash, hit a peak valuation of $6.5 billion in February 2016 when it received $50 million from investors.
Since then, Snapdeal, which had been running Flipkart close and was bigger than Amazon India at the time, has struggled. It became an also-ran in India’s e-commerce market, cut thousands of jobs and saw an exodus of senior and middle managers. Its board became dysfunctional as the financial interests of investors clashed.