Snapdeal in talks with SoftBank to raise funds at lower valuation

New Delhi/Bengaluru: Snapdeal, run by Jasper Infotech Pvt. Ltd, has initiated discussions to raise fresh funds largely from existing investor SoftBank Group Corp. at a significantly lower valuation than the $6.5 billion peak it touched in its previous round, three people familiar with the matter said.

Snapdeal and SoftBank have discussed a valuation range of $3-4 billion, but the online marketplace is still trying to attract new investors at a higher valuation, the people mentioned above said on condition of anonymity.

The amount of the fundraising is yet to be finalized.

If the deal materializes, it will be the first time Snapdeal’s valuation will take a hit. While 2016 saw several investors mark down industry leader Flipkart’s valuation by as much as 40%, one of Snapdeal’s mutual fund investors, BlackRock Inc., has maintained its valuation estimate of the online marketplace.

“We are well capitalized and we are not engaged in any active financing discussions,” a Snapdeal spokesperson said in an emailed response to a query.

SoftBank declined to comment.

Snapdeal has also held talks with strategic and financial investors to part-sell online payments firm Freecharge, which it acquired in April 2015. The deal has not materialized due to an expectation mismatch in valuations

Gurgaon-based Snapdeal has lost significant market share to rivals Flipkart and Amazon in the last 12-18 months, slipping to a distant No. 3 position. Cost-cutting efforts undertaken in 2016 have resulted in a lower cash-burn rate as the company looks to focus on profitability, not market share.

Snapdeal’s loss more than doubled to Rs3,316 crore in the year ended 31 March 2016. Revenue rose 56% to Rs1,457 crore. Revenue growth slowed sharply from the 450% growth Snapdeal reported in the year to March 2015.

Japan’s SoftBank Group is one of the largest shareholders in Snapdeal, with close to a 33% stake in the company that has raised nearly $2 billion in funds over the past seven years.

If the internal round with SoftBank materializes at the current negotiated valuation, it will stretch SoftBank’s stake to over 50%, given the investor’s strong shareholding rights in the company.

ALSO READ | Snapdeal founders Kunal Bahl, Rohit Bansal own less than 6.5% of the firm

Other top investors include Kalaari Capital, Nexus Venture Partners, eBay Inc., Foxconn Technology Group and Alibaba Group Holding Ltd. Co-founders Kunal Bahl and Rohit Bansal now have a less than 6.5% stake in the company.

Snapdeal is currently sitting on over $250 million of cash in the bank but given a slow funding market, the company wants to build a war chest to fight competition from Amazon and Flipkart, according to two of the three people mentioned above.

Founded in 2010 by school friends Bahl and Bansal as a deals site, Snapdeal delivers goods to over 5,000 cities and towns in India.