Founders of the Indian e-commerce company Snapdeal, Kunal Bahl and Rohit Bansal along with Nexus, one its early investors have finalised the agreement with Japanese investors Softbank Group Corp. regarding the sale of Snapdeal to its bigger rival Flipkart. The company was started in February 2010 by Kunal Bahl, a graduate from Wharton Business School and Rohit Bansal, an IIT Delhi alumnus. The company was started as a “daily deals” and grew rapidly as one of the biggest online marketplace selling more than 10 million products across various categories from more than 100,000 sellers. But the company was going through a rough time due to competition from its bigger rivals Amazon India and Flipkart and was not generating decent revenue to make its investors happy.
SoftBank Group Corp. is one of the major investors of Snapdeal and they had invested around $647 million in fresh capital during the 6th round funding in Oct-2014. They had already invested more than $900 million on this online marketplace but were not happy with its revenue in last year. Also, Snapdeal’s market value has dropped down from $6.5 billion in Feb 2016 to just around $1 billion this year.
As part of the merger of Snapdeal with Flipkart, the founders Kunal Bahl and Rohit Bansal are likely to obtain a payout of USD 30 million in cash each from SoftBank Group after their exit from the company. The founders only own 6.5% stake in Snapdeal which is currently valued at around $1 billion, much less than what it was valued a year back. It is also noted that SoftBank Group is going to invest a large sum in the merged entity, giving the existing stakeholders an exit.
SoftBank Group has already stated in its earnings report for the fiscal year 2016-17 that it has incurred a valuation loss of $1.4 billion from its Indian investments Ola and Snapdeal. Softbank Group has also agreed to pay Nexus $50 million to $60 million in return for their stake in Snapdeal. Flipkart is expected to sign the term sheet soon and will start merging both entities together. This will make Flipkart the biggest and most powerful e-commerce giant in India.
Inside Sources confirmed that except for a few top executives, other employees may not be retained in the combined entity. Already, Snapdeal has kicked off more than 30% of its workforce during February this year. Over the last few months, the company has also witnessed massive voluntary attrition. The exact headcount of employees is not ascertained as of now and it is expected to below 2,000. While SoftBank and Snapdeal were not immediately reachable for comment, Nexus also declined to comment on the progress on this merger.
