Bahl, Bansal move to reassure staff as Snapdeal sale nears
10 April 2017
Snapdeal founders Kunal Bahl and Rohit Bansal have told their employees that their job security is a top priority for them, even as the company's investors discuss various options for the ecommerce site, prominent among them being a sale to market leader Flipkart.
"There has been a lot of media reporting and speculation around Snapdeal recently. While our investors are driving discussions about the way forward, I am reaching out to let you know that the wellbeing of the entire team is mine and Rohit's top priority. We will do all that we can, and more, in working with our investors to ensure 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 clearer...," the email to employees.
This is the third communication by the founders in the last two months aimed to calm the nerves of their employees amid uncertainties surrounding the company's future.
The most likely scenario at present is a sale to Flipkart, orchestrated by Japanese investor Softbank, wherein the Japanese group is likely to invest up to $1.5 billion in the merged entity by picking up primary and secondary shares. SoftBank may end up with around 15 per cent in the Flipkart-Snapdeal combine if the transaction goes through (See: Snapdeal reported on the verge of being sold to Flipkart).
Snapdeal's woes over the past few months have been chronicled in a series of news reports, as it fights to survive in a cash-guzzling e-commerce market. It has been reported earlier that SoftBank, which holds more than 30 per cent in Jasper Infotech, the parent of Snapdeal and Freecharge, is looking to sell the e-wallet firm for as low as $200 million, having bought it for $400 million in a cash-and-stock deal two years back.
According to sources, Snapdeal has about 3,000 employees in its e-commerce operations. The company also has mobile wallet (FreeCharge) and logistics (Vulcan) operations.
Snapdeal's largest investor SoftBank is believed to be re-working its plan for the sale of Snapdeal and a final decision is likely to be made in the next few weeks.
Softbank is engaged in dialogue with other investors with board representation - Kalaari Capital and Nexus Venture Partners - to reach a consensus in terms of valuation.
Snapdeal's seven-member board includes representation from investors SoftBank, Kalaari Capital and Nexus Venture Partners, as well as co-founders Kunal Bahl and Rohit Bansal. The board of Jasper Infotech also has Bharti Enterprises vice-chairman Akhil Gupta as an independent director.
Alibaba-backed Paytm is also in fray as a potential buyer. Alibaba is also a shareholder in Snapdeal.
The deal, if completed, would mark the biggest acquisition in the Indian ecommerce space and change the landscape of the sector that is witnessing intense competition among players.
The chief hurdle to a sale at present seems to be valuation, as Kalaari Capital and Nexus Venture Partners have not agreed with the valuation given by SoftBank (SoftBank rift with Kalaari, Nexus threatens Snapdeal's future). Snapdeal was valued at $6.5 billion in its last funding round in February 2016. The valuation has shrunk since then and the potential deal could be struck at a much lower price.
The cash-strapped firm, over the last few months, has had to trim its workforce significantly and shut down non-core businesses. Earlier this year, Snapdeal laid off about 600 people (Snapdeal axes 600; co-founders Bahl, Bansal take 100% pay cut).
Indian e-commerce companies have seen funding dry up over the last few months as investors are focussing extensively on profitability and rationalisation of expenses. With intense competition from deep-pocketed global rivals like Amazon, companies like Flipkart and Snapdeal could face more heat in the coming days.