A lifeline for Snapdeal amid layoffs, mounting losses, exits; etailer to get $100-150 mn funding from SoftBank

At a time when India's e-commerce biggies are facing the prospect of acute cash shortage to keep their business afloat, hope seems to be building up for the country's third largest e-tailer Snapdeal.

Gurgaon-based Jasper Infotech, the owner of Snapdeal, is close to raising around $100-150 million capital from its largest shareholder SoftBank.

However, with spiralling losses and slowing business in the wake of a tough business environment, the latest fundraising exercise could crimp the company's valuation to below $3 billion, The Economic Times report said.

The e-commerce major's valuation had reached a peak of $6.5-7 billion when it last raised $200 million from Canada-based Ontario Teachers’ Pension Plan and other investors in February 2016.

So far, the Kunal Bahl and Rohit Bansal founded company has raised nearly $1.65 billion from several investors, including Japan-based SoftBank, Chinese etailer Alibaba, Taiwan's Foxconn and Kalaari Capital, among others.



In fact, the company was last valued below $3 billion between late 2014 to early 2015 following stake sales by several shareholders, says a report.

If the latest fundraising exercise goes through, the Masayoshi Son-led SoftBank's stake in Snapdeal could increased to 40 percent from around 33 percent now.

However, the capital infusion may come with some caveat for the company, especially to control its finances. In order to boost their sales, all the e-commerce firms had burnt investors' money to offer hefty discounts on products sold on their marketplaces which led to mounting losses on their books.

In case of Snapdeal, the online etailer had doubled its losses to around $436 million or Rs 2,960 crore during the financial year ending March 2016. It's digital payments arm FreeCharge also registered losses of Rs 270 crore while its logistics arm clocked losses of Rs 20 crore, a VCCircle report said.

Other etailers such as Amazon India reported higher losses of Rs 3,572 crore crore and Flipkart posted a loss of Rs 2,306 crore for the year ended 31 March, 2016.

In the wake of rising losses and slowing business, Snapdeal last month handed pink slips to around 600 employees across its e-commerce, logistics and payments operations.

Not just employees, the company's online sellers, too, are de-boarding the maretplace in recent months due to payment delays and other logistical problems.

“I was one of the first few sellers to get listed on Snapdeal in 2012. From there, Snapdeal increased its number of sellers in this region to 6,000. Now I can say that there will be hardly 200-300 sellers in this region who are doing business with Snapdeal," The Financial Express report said quoting a large appliances seller in Hyderabad.

At Snapdeal's fulfillment centre in Medchal in Hyderabad, the orders have trickled down to just 1,000-1,500 a day from 15,000 at the peak, the FE report said.

Also, among several exits seen at the troubled Gurgaon-based online marketplace, Amitava Ghosh, VP engineering is also believed to be leaving the company,a Times of India report said.

Updated Date: Mar 08, 2017 13:29 PM

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