Struggling online marketplace Snapdeal which has been in talks with Flipkart for a buyout has reportedly rejected the latter’s $800-900 million offer on grounds of undervaluation. Flipkart, India’s leading e-commerce player, was conducting due diligence on Snapdeal over the last eight weeks. It had appointed global consulting firm Ernst & Young for the purpose. With “no major red flags” raised by Flipkart, Snapdeal wanted a higher valuation, ET reported.
However, this may not be the end of Flipkart-Snapdeal talks. Though it might delay Softbank’s proposed $1.5-2 bllion in the Bangalore-based firm. The Japanese investment giant, which is among Snapdeal’s backers too, is yet to have a star performer in India. The Flipkart-Snapdeal arrangement is being engineered primarily by Softbank. It would lead to creation of giant e-commerce entity and give Flipkart a significant lead over current No. 2 Amazon. ALSO READ: Flipkart, Snapdeal in merger talks as competition grows in e-commerce space: Report
Flipkart’s buyout offer is only for Snapdeal’s marketplace and doesn’t include Freecharge (a mobile wallet it owns) and Vulcan Express (in-house logistics arm): the two would be separately sold to other buyers. One name doing the rounds is that of Paytm, India’s leading digital payments platform, that wants to buy Freecharge for $40-50 million. For Snapdeal’s main marketplace though, it is unclear when Flipkart would make a new offer.
However, a revised offer is likely to find more favour with Snapdeal’s heavyweight minority investors that include PremjiInvest (the personal investment arm of Wipro’s Azim Premji), Ratan Tata and BlackRock (asset manager). The ET report adds that PremjiInvest is also building consensus among Snapdeal’s other small investors, that include Singapore’s sovereign wealth fund Temasek, to oppose potential special payouts to certain shareholders. These include Snapdeal’s early investors and founders Kunal Bahl and Rohit Bansal. ALSO READ: Snapdeal founders Kunal Bahl, Rohit Bansal’s letter to employees all but confirms sale speculations
There have been conflicting reports on Snapdeal’s valuation. In February 2016, the company had raised $200 million from a Canada-based venture capital firm at a valuation of $6.5 billion. A year later, when Flipkart made the offer, it valued Snapdeal at not more than a $1 billion. Some reports even suggest that Flipkart’s original offer to acquire Snapdeal valued the latter at $550 million or thereabouts. That is embarrassingly low and explains why Snapdeal might be demanding a revised offer.