Snapdeal’s co-founders hint firm’s fate not in their hands
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Bengaluru: Snapdeal co-founders Kunal Bahl and Rohit Bansal indicated that the fate of the company is out of their hands with its investors “driving the discussions around the way forward” for the struggling online marketplace, which is up for sale after failing to secure fresh capital.
Mint reported on 22 March that SoftBank Group Corp., Snapdeal’s largest investor, has initiated talks to sell the company to one of its bigger rivals, Flipkart or Paytm. At that time, the company had denied it was up for sale.
In an email sent to employees on Sunday Bahl and Bansal didn’t refute reports in Mint and other publications that Snapdeal’s days as an independent company were nearing an end. Instead, the two entrepreneurs wrote of ensuring “positive professional as well as financial outcomes for the team”.
“There has been a lot of media reporting and speculation around Snapdeal recently. While our investors are driving the discussions around the way forward, I am reaching out to let you know that the well-being of the entire team is mine and Rohit’s top and only priority. We will do all that we can, and more, in working with our investors to ensure that there is no disruption in employment and that there are positive professional as well as financial outcomes for the team as the way forward becomes clear,” Bahl and Bansal wrote in the email, a copy of which has been seen by Mint.
The email was sent to Snapdeal employees with the intention of boosting the morale of the company’s employees.
Since January, Snapdeal (Jasper Infotech Pvt. Ltd) has cut hundreds of jobs and slashed spending on discounts, advertising and logistics to conserve cash after it couldn’t get fresh funds. A sale of Snapdeal seems all but inevitable now given that the company has lost out for good to Flipkart and Amazon in the e-commerce war. Its payments unit, Freecharge, too has no hope of catching up with Paytm, which is establishing a near-monopoly in the nascent digital payments market.
A sale, however, depends on the resolution of a tussle between Snapdeal’s three most powerful investors, Nexus Venture Partners, Kalaari Capital and SoftBank. The three investors have differences over Snapdeal’s valuation in a potential sale. Snapdeal was valued at $6.5 billion in its last funding round in February 2016, but any sale will happen at a fraction of that valuation.
Last week, the three investors took the first steps towards resolving their rift, clearing the way for a sale of the e-commerce marketplace to one of its bigger rivals, Flipkart or Paytm.
SoftBank is eager to sell Snapdeal to Flipkart even in a cut-price all-stock deal and then invest more cash in the buyer, Mint reported last week. Whereas, Nexus and Kalaari, which have veto powers on such matters, will approve a sale if they are bought out by SoftBank. The two venture capital firms have asked SoftBank to pay $100 million each for their shares. Bahl and Bansal, too, have asked SoftBank to pay $100 million in cash toward payouts to them and their management team, Mint reported then. Softbank is yet to take a decision on their demands.