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Snapdeal exploring merger with Flipkart, Amazon; mega e-commerce consolidation in the offing?

The Indian e-commerce sector may be gearing up for a major consolidation and shake-up with a report in Techcirlce claiming that Snapdeal is exploring merger with rivals Flipkart and Amazon.

A screengrab of Snapdeal

Screengrab of Snapdeal

The development, if true, assumes significance in the the light of the news that Chinese giant Alibaba is looking to acquire another market place Shopclues in its bid to gain a strong foothold in the Indian online shopping market. Interestingly, Alibaba holds a stake in Snapdeal too.

There is no confirmation on the latest Snapdeal move for now. In fact, the company has rubbished the report with a spokesperson telling Techcircle that its "so-called ‘news’ is baseless". "...We categorically deny this speculative, unfounded story,” the spokesman has been quoted as saying in the report.

Flipkart too has vehemently denied the report, while Amazon did not respond to the queries, says the report.

However, a person in the know has told the website that "only feelers have been sent (to prospective buyers)...."

Interestingly, Flipkart itself was reported to have engaged with Amazon for a possible merger earlier this year. However, nothing on that front has moved yet.

According to the Techcircle report, Snapdeal's move is fall out of the top level shake up in Japanese telecom giant SoftBank, a company which has led two rounds of investments worth $627 million and another $500 million in 2014 and 2015.

Nikesh Arora, who had lead many of Softbank's Indian investments, decided to step down from the post of president at the Japanese company in June after its Chairman & CEO Masayoshi Son decided to continue as chairman for an extended period of time. With Arora stepping down, there have speculation that SoftBank's interest in India is likely to see a ramp down.

In February, when Ontario Teachers’ Pension Plan and others invested $200 million, Snapdeal was valued at $6.5 billion. Flipkart, meanwhile, has been witnessing markdowns of its valuation of late, after it hit a valuation of $15 billion in 2015.

Analysts have opined earlier that consolidation is the way ahead for the Indian e-commerce after venture capitalists squeezed funding and the government put in place rules restricting discount sales, which were once the dominant strategy for doing business for most of the players.

Updated Date: Aug 19, 2016 09:43 AM

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