Coping with the heavy competition that Amazon has posed in the Indian e-commerce market, home-grown companies like Flipkart and Snapdeal have reportedly been speculating consolidation for a while now. Few weeks ago, Flipkart raised $1 billion, and was even rumored to take over ebay s India business. Soon after, there were rumors of Flipkart and Snapdeal entering a merger deal allowing a joint entity to tackle the competition. And now, according to an new ET report, Japan s Softbank, which is the largest shareholder of Snapdeal, held a meeting with Flipkart for the proposed sale of Snapdeal. Also Read - iPhone 11, iPhone XR up for grab with massive discount on Flipkart Big Saving Days saleAlso Read - Flipkart Big Saving Days sale begins: Pixel 4a, Realme X7, Samsung Galaxy F62, more on discount
Reportedly, in the boardroom meeting, SoftBank put forth terms that, if the deal finalizes, Snapdeal shareholders will get one share in Flipkart for every ten they own. Other early investors of Snapdeal, like Kalaari Capital and Nexus Venture Partners, have also asked for about $100 million each from the sale, ET s sources said. It is worth noting that SoftBank has more than 30 percent stake, and is one of the biggest investors in Snapdeal, which drew valuation at $6.5 billion in 2016. And if the deal comes through, the sale could see SoftBank pick up around 20 percent stake in Flipkart for about $1.5 billion. If this deal does come through, this would turn out to be on of the biggest acquisitions in the Indian e-commerce space. Also Read - Flipkart Big Saving Days smartphone deals: Pixel 4a is star of the show once again
However, what makes this speculation interesting is Snapdeal s denial of any such sale talks. Few weeks ago, some media reports alleged that Snapdeal was in preliminary talks with two of its biggest rivals Alibaba-backed Paytm E-Commerce Pvt Ltd, and Flipkart India for a potential sale. However, in a response to BGR India regarding the reports, Snapdeal had denied any such discussion. RELATED: Snapdeal categorically denies any sale talks with Flipkart, Paytm
Snapdeal categorically denies having had any such discussion. The information is incorrect and without basis. We are making decisive progress in our journey towards profitability and all our efforts are aligned in this direction.
But then again, there is no smoke without fire. Today s report quotes a person aware of the board meeting between SoftBank and Flipkart saying, “A final decision on the sale is yet to be taken.” The board meeting signals easing of tensions among Snapdeal’s early investors, Kalaari Capital and Nexus Venture Partners, and it’s largest backer Softbank, said one of the sources mentioned above. RELATED: Flipkart, Snapdeal in merger talks as competition grows in e-commerce space: Report
While Flipkart appears to have held the ground amid the intense competition, the smaller players, especially Snapdeal, have faced the music. Snapdeal has been hit hard by a combination of instances in last one year, like mounting losses, ongoing churn of its top leadership in the company, including Govind Rajan, chief executive of its payments unit Freecharge, and Tony Navin, head of partnerships and strategic investments, and the rapid growth of its rival Amazon in the same span of one year. In an already cash-starved space, Snapdeal has been working on restructuring the company in a bid to revive itself. However, this forced the company to reportedly lay off around 600 employees. According to a Hindu report, Snapdeal is left with cash that will last for the next 10-12 months at most. ALSO READ: Ola to raise $100 million funds via Tata s RNT Capital, Falcon Edge Capital: Report