Potential Flipkart-Snapdeal Merger Gets Nod From Reluctant Investor

Marcus Newton
May 13, 2017

India's largest online marketplace Flipkart has made an informal offer to buy struggling smaller rival Snapdeal for $1 billion in an all-stock deal, amid persistent differences between Snapdeal's largest investor SoftBank Group and two other key shareholders.

Commenting on the same, a source close to the development told Moneycontrol, "The due diligence will start next week with some Flipkart executives coming to (Snapdeal's) office and warehouses".

Even though SoftBank, Nexus Venture Partners and Kalaari Capital are yet to resolve their conflict, the latest round of talks has pushed them closer to a deal, three people aware of the discussions said, requesting anonymity as the talks are confidential.

However, market insiders said that the deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian e-commerce space and change the landscape of the sector that is witnessing intense competition among players. Softbank has been making every effort to get NVP on board for the sale of Snapdeal, and a breakthrough could come as early as this week.

SoftBank on Wednesday said it suffered a loss of $1 billion (Rs6,500 crore) on its investment in Snapdeal during 2016-17, nearly matching the money it put in the home-grown marketplace.

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Recently, there were reports of a possible merger between Snapdeal and Flipkart brokered by SoftBank.

Valued at $6.5 billion in February 2016, Snapdeal has seen the valuation shrink since then and industry watchers said the potential sale to Flipkart could be done at about $1 billion.

Further, reports suggest that Paytm is in talks with Snapdeal's largest investor, Japanese-based SoftBank, for fresh inflow of funds worth over $1.9 billion. It posted a consolidated loss of over Rs 2,311 crore, about Rs 6 crore a day, during 2015-16, on account of promotional expenses and high employee cost.

Jasper InfoTech, the parent company of Snapdeal, has been pumping in money into FreeCharge, having put in about '420 crore according to documents filed with the registrar of companies. On Wednesday, SoftBank said it suffered a loss of $1billion ('6,500 crore) on its investment in Snapdeal during 2016-17. Snapdeal's mobile wallet service Freecharge could also reportedly be sold separately.

Like most e-commerce players in India, Snapdeal has been burning cash to sustain discounts - and keep customers - in a cut-throat online market. Yet to be decided is compensation for founders Bah and Bansal.

Other reports by MaliBehiribAe

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