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Amid boardroom battle, SoftBank yanks Snapdeal fund offer

03 April 2017

Japanese investor SoftBank has abruptly rescinded $150-200 million debt financing it had offered to Snapdeal owner Jasper Infotech, escalating a boardroom battle involving new and old investors in the online marketplace, according to an Economic Times report citing people aware of the developments.

It has been widely reported earlier that lines are being drawn across the seven-member board, with SoftBank, the largest stakeholder in Snapdeal, squaring off against two of Snapdeal's early backers, Kalaari Capital and Nexus Venture Partners. (See: SoftBank rift with Kalaari, Nexus threatens Snapdeal's future)

''Both Kalaari Capital and Nexus Venture Partners are livid at the developments, and have questioned SoftBank about its intention with regard to Snapdeal,'' one of the ET's sources said.

''There was a term-sheet offering Snapdeal debt financing for a period of three years, which was inexplicably withdrawn within days, giving credence to the view that SoftBank has made up its mind to sell the company,'' a second person said.

Apart from SoftBank, which has two seats on the board, and Kalaari and Nexus, which have one each, Jasper's board includes cofounders Kunal Bahl and Rohit Bansal, and Bharti Enterprises vice-chairman Akhil Gupta as an independent director.

The latest sequence of events took place some three weeks ago. SoftBank declined to comment on the developments, while Jasper Infotech, Nexus Venture Partners and Kalaari Capital did not reply to emails from ET.

According to the report, SoftBank has led all discussions relating to a potential sale or merger involving Snapdeal, with no other stakeholder involved. ''SoftBank has been solely fronting all the (sale) conversations till date. The other board members have been pretty much kept out of the loop thus far,'' one of ET's sources said.

The rising differences between Jasper's largest stakeholder, which has pumped in about $900 million in the company, and its early investors were first reported by Mint on 31 March.

This is not the first time that Jasper's board members, particularly SoftBank, Kalaari Capital and Nexus Venture Partners, have crossed swords.

In December, SoftBank had offered a direct $50-million monthly injection in Snapdeal, contingent on a potential merger or sale of the company. Kalaari and Nexus Venture Partners disagreed with the terms, asking the Tokyo-headquartered investor to instead guarantee the funding.

That offer was also taken off the table. SoftBank's stake in Jasper stands at about 33 per cent while Kalaari Capital and Nexus Venture Partners owned about 8 per cent and 10 per cent respectively. Both the founders, combined, owned about 6.5 per cent of the company, which at its peak early last year was valued at about $6.5 billion.

Kalaari, which has invested about $27.5 million in Jasper, earned handsome returns estimated at about $100 million when it sold a portion of its stake to SoftBank in late 2014.

Nexus Venture Partners, which has invested $40-50 million in the company, has not sold any of its stake.

Snapdeal, which along with Flipkart, has played a key role in developing India's ecommerce sector, and is still regarded as the third-largest ecommerce company in the country in spite of dwindling sales.

 SoftBank has reached out to Flipkart to sell Snapdeal. The potential contours of that deal could see SoftBank pick up a 20 per cent stake in the country's largest commerce company for about $1.5 billion, in the process buying out $1 billion worth of Tiger Global's holding in Flipkart, according to the ET report.

Governance rights for SoftBank have also been discussed as part of the deal, the report adds.

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