Snapdeal board meeting today to discuss sale to Flipkart
02 May 2017
Seven board members of Snapdeal are meeting at a luxury hotel in Gurgaon today to discuss the final contours of the sale of the ecommerce firm to Bangalore-based rival Flipkart, sources privy to the discussion told Moneycontrol.
The deal which has been in works for last few weeks is stuck due disagreement within stakeholders over a final settlement with the company's earliest investors.
According to one source, the board will focus on bringing Nexus Venture Partners, one of the early investors in Snapdeal, to agree to the deal to sell the company. The meeting is also likely to bring clarity to the fate of over 1,000 existing employees of Snapdeal.
"Issues such as employees retention and severance packages have broadly been sorted by now," another source close to Snapdeal told Moneycontrol. The deal is likely to include settlements for only select top executives.
Other senior employees including senior vice presidents and category heads could get salaries ranging between 6-10 months titled as 'retention bonus' to join the merged entity with a specified lock-in period.
For the bottom rung of employees, there has been a discussion to give them around six months of employment assurance.
Snapdeal did not respond to an email query by Moneycontrol on the issues.
While Softbank representatives are expected to attend the meeting through a video conferencing, Nexus and Kalaari will be present in Gurgaon.
Cofounders Rohit Bansal, Kunal Bahl, Softbank's Lydia Jett and Kabir Misra, and Kalaari Capital's Vani Kola are expected to join the meeting. Nexus Venture Partners' Suvir Sujan is also likely to be present at the meeting which was scheduled weeks ago.
Even as the merger talks are in progress, Snapdeal has asked sellers to take back slow-moving inventory from its warehouses. According to one of the sources quoted above the gross merchandise value of the inventory that Snapdeal stores in its warehouses for the sellers amounts to about Rs300-330 crore. Of this, at least 20-25 per cent constitutes slow moving inventory.
Similar to other ecommerce firms, Snapdeal stores inventory in warehouses since that allows it to manage faster delivery of the product to the consumers.
According to an industry analyst, the deal is likely to witness a full exit to Snapdeal's earliest investor Kalaari Capital.
"Kalaari has partially exited the company anyway in previous rounds. The bigger question is whether Flipkart wants to bring them on board or not," a source remarked.
Snapdeal was started in 2010 by schoolmates Kunal Bahl and Rohit Bansal. Things started to turn sour when an expected large funding from Softbank did not come late last year.
There have been multiple reports on differences among the investors as well as the founders of the company, which has stalled the deal.
In an email addressed to its employees last week, Bahl has said that it was the investors who were driving the decision on the way forward, indicating that the founders had little control over immediate developments at the company (See: Bahl, Bansal move to reassure staff as Snapdeal sale nears).
The company is currently considering multiple options. Besides having conversations to sell Snapdeal, it is also in independent talks with TVS Logistics and Future Supply Chain Solutions to sell Snapdeal's logistics arm Vulcan Express. For the payments arm Freecharge too, Snapdeal is looking for potential buyers.
Today's board meeting will help clear the air on the company's various subsidiaries as well.