Snapdeal owner Jasper Infotech is inching closer to securing a lifeline from Japan's SoftBank Corp, its largest shareholder, but the transaction could drag its valuation to under $3 billion, according to an Economic Times report citing people familiar with the development.
SoftBank is negotiating to invest $100-150 million in Jasper in tranches, according to the report. Overall investment could be as high as $300 million in Jasper, which is grappling with slowing sales and has been forced to cut jobs.
Jasper and SoftBank have been going back and forth the last two months on crucial terms of the deal, including on the investment size and the valuation, the report cited sources as saying. Jasper's board has held talks with SoftBank for raising funds at a valuation of $1.5-2.5 billion, they said.
If the transaction goes through, it would be the latest instance of a top-tier Indian internet company's valuation taking a hit, as raising fresh capital remains an arduous task. Cab-hailing company Ola is raising capital from SoftBank at a 40-per cent drop in valuation, ET reported in November, citing people aware of that transaction.
Gurgaon-based Jasper was last valued at $6.5 billion when it raised $200 million in funding led by Canada's Ontario Teachers' Pension Plan in February 2016. It was valued below $3 billion in late 2014 to early 2015 during stake sales by shareholders to other investors.
That was shortly after Jasper first raised money from Soft-Bank at a $1.8-billion valuation in October 2014.
SoftBank currently owns about 33 per cent stake in Jasper. Its next investment in Jasper could see the Masayoshi Son-led technology, telecom and internet-focused investor raise its stake in the company to about 40 per cent.
Spokespersons for Snapdeal and SoftBank declined comment. "We never comment on speculation," a SoftBank spokesperson wrote in response to an email sent by ET on Monday. "We have no comments on your query," a Snapdeal spokesperson wrote separately.
A fresh investment from Soft-Bank will likely come with tough terms, including tighter controls on finances.
"Earlier cheques were written after Snapdeal submitted annual operating plans. Now SoftBank will ask for Snapdeal's monthly budgets, approve them, and then remit the funds," said one of the ET's sources. Snapdeal, Jasper's flagship business and the country's third largest online marketplace after Flipkart and Amazon India, has been beset by slowing growth, mounting losses, falling market share, and an exodus of senior executives.
Jasper Infotech has been slashing costs aggressively this year by cutting its marketing budgets and resorting to layoffs. Cofounders Kunal Bahl and Rohit Bansal, in an email to employees last month, admitted that they had made errors in execution.
"We started growing our business much before the right economic model and market fit was figured out. We also started diversifying and starting new projects while we still hadn't perfected the first or made it profitable,'' Bahl wrote in the email. (See: Snapdeal axes 600; co-founders Bahl, Bansal take 100% pay cut).
Jasper has been on the road to raise capital and rope in a strategic investor for FreeCharge for almost 18 months, but has been unable to do so. It has also explored a strategic sale for its logistics unit, Vulcan.
SoftBank's next fund infusion into Jasper could be made from its $100-billion, tech-focused Vision Fund, the largest pool of private capital ever assembled, and which is being led by India-born Rajeev Misra.
A fresh investment from SoftBank will likely come with tough terms, including tighter controls on finances.