August 01, 2017

Snapdeal, Flipkart call off merger talks, Snapdeal to remain independent

by Neha Monga

The much talked about merger between Flipkart and Snapdeal has been called off after the later cancelled a crucial meeting between the two parties on Sunday.

“As we have been exploring strategic options over the months, we have decided to pursue an independent path and terminate all strategic discussions,” a Snapdeal spokesperson said in a statement, without referring to Flipkart.

The decision is a win for Snapdeal co-founders Kunal Bahl and Rohit Bansal, who were against the sale from the beginning. Bahl and Bansal hold just about 6.5 per cent in Snapdeal, while

“Snapdeal’s vision has always been to create life-changing experiences for millions of buyers and sellers across India. We have a new and compelling direction—Snapdeal 2.0—that uniquely furthers this vision, and have made significant progress towards the ability to execute this by achieving a gross profit this month. In addition, with the sale of certain non-core assets, Snapdeal is expected to be financially self-sustainable,” a Snapdeal spokesperson said.

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The company recently sold Freecharge, the mobile payments company to Axis Bank for Rs 385 crores. With this money, along with the cash in bank, the company hopes to have a running time of around four years.

While the co-founders got their way with the decision to call off the sale, the 25 odd stakeholders in the company are left in a lurch. Softbank which has around 33 percent stake in the company with an investment of over $900 million, and is Snapdeal’s biggest investor , worked hard on convincing the other investors to get on board the deal, but could not manage to do so.

However, Softbank finally agreed with the Snapdeal board and agreed to go ahead with Kunal Bahl’s plan of independent entity.

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“This decision (to stay independent) was taken by the founders and the company and SoftBank will support it, since we always support the company and the founders. We’re a shareholder. The company had options and this is what it picked,” said Kabir Misra, managing partner at SoftBank.

Among other investors, Vani Kola, managing director of Kalaari Capital, said in a media interview, “I am extremely disappointed and shocked.” According to Kola, the founders had not kept in mind interests of investors and employees.

After the deal was called off, the founders were quick to chalk out a road map to profitability in the next 12 months and shared it with their employees through a mail.

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“We have made tremendous progress towards this new path over the last few months and are already profitable at a gross profit level, with clear visibility to making upwards of Rs 150 crore in gross profit in the next 12 months. There is zero ambiguity. We will be running the company as we have been and rapidly moving ahead with our mission,” Bahl said in the mail.

According to Reuters, Standard Chartered’s private equity arm is in talks to acquire Snapdeal’s logistics arm Vulcan Express.

“We will need to keep a tight control on our costs and work towards becoming a hyper efficient culture delivering profitable growth, month on month,” Bahl said in his email.

 

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