Softbank Prepares Snapdeal for Sale to Flipkart

• 7 April 2017 | 1203 Views | By Mint2Save

Softbank, one of the largest shareholders in the online retail Startup, Snapdeal, seems to exit the company. It has been reported that Softbank is in talks with another online retail major, Flipkart, to sell off its stake of 33% in Snapdeal. This multi billion merger was in rumors since last year. This would be Flipkart’s second acquisition this year as the Bansal wonder has already bought Ebay India.

If this acquistion gets successful, then it would mark as a new chapter in Indian online retail.  The age old Flikpart-Snapdeal rivalry would come to an end. Further, the online retail competition would limit itself mainly to only two giants: Amazon and Flipkart.

It is to be noted here that during its brief stint as an online retailer, Snapdeal has also ventured into real estate, vehicle dealing too. It has even ventured into the much popular world of digital transaction and mobile wallet as it acquired Freecharge.

Softbank, a Japanese multinational, having invested in several startups, has set up a possible merger between the company Snapdeal and its greater competitor Flipkart and Paytm. But while asking from the Kunal Bahl, co-founder and CEO of Snapdeal they refuse to accept this report of sales talks of Snapdeal with Filpkart and Paytm and said ‘information is incorrect and without basis’.

On Tuesday, April 4^th,2017 many business news sources have confirmed that Softbank was expected to invest about $1.5 billion in the merged firm. The Indian E-commerce industry is growing at a huge pace in current years. It is believed that Flipkart is the market leader in the e-commerce sector, but its competitor Amazon is lowering it down as a better financed international market leader and Snapdeal has struggled a lot in this industry is currently leading at third.

Softbank recently have drawn up three choices for Snapdeal:

• Either merge with Flipkart,
• or join with Alibaba led Paytm,
• or a recount of Soft Bank’s investment to zero,

On Tuesday, reports said that at a board meeting the company behind Snapdeal, SoftBank showed interest in getting a part of the stake owned by Kalaari and Nexus. As Kalaari and Nexus being the venture partners hold about 8 percent and 10 percent correspondingly according to documents filed with the Registrar of Companies in the company founded by Kunal Bahl and Rohit Bansal. Snapdeal Investors, Kalaari and Nexus are looking for a sum of $100 million each for their stakes and on other side Snapdeal promoters Kunal Bahl and Rohit Bansal asked SoftBank for a $100 million to spend on them  in order to clear the way for a sale.

Also, 6.5% of the company is still owned by Kunal Bahl and Rohit Bansal together after selling their remaining stakes. Kalaari and Nexus are the largest investors for Snapdeal and any bad deal could be destructive for the two native venture firms.

Snapdeal more likely to sell to Paytm or Flipkart

Snapdeal reported a loss of 29.6 billion rupees in the March 31, 2016. Snapdeal in the last two to three months, 2017 has reduced staff (layoffs of 600 employees), cut discounts and minimized marketing spending and seen a drop in monthly sales and it is said that in February Snapdeal had about Rs1,100-1,200 crore of cash left in the bank, making it crucial for the company to secure funds immediately. Thus, Snapdeal company’s cash position has lowered its ability to fight with huge ecommerce players Flipkart and Paytm, where Filpkart has in advanced talks to raise a $1 billion round and Paytm E-Commerce which recently safe $200 million from Alibaba Group.

Softbank is in a hurry to sell Snapdeal to Flipkart as soon as possible even in a cheap price of all-stock deal and then invest more cash in the buyer. Flipkart with it’s already acquired entities Myntra and Jabong is now looking forward to merge Snapdeal to gain market share which is going to give a serious competition to other major players like Amazon and Paytm.

On the other side, Alibaba, with its newest $200 Million investment in Paytm has been looking forward to cover Indian market and looks to capture the larger share of the Indian ecommerce platform. But after the discussion it seems that Paytm appear to be more advanced than those with Flipkart. Because the team from Alibaba has specially visit Paytm to discuss the deal. And Alibaba is a main investor for Paytm and Softbank is one of its top investors.

It is difficult choice for Snapdeal to choose among two market players and if Snapdeal does decide to sell its business to either to Flipkart or Paytm then it will be the biggest acquisition in the history of Indian ecommerce in the country.