Over the last couple weeks, Snapdeal has been making rounds of the interwebs for being plagued with operational troubles. The firm has either been talking about their management exodus, huge workforce layoffs, constant cash crunch or how they aspire to become profitable in the next two years. But, the rumor you’ve already read in the headline might come as the biggest surprise of all.
Citing source familiar with the developments, Economic Times reports that “exploratory” talks for merging Paytm E-commerce with one of the largest e-commerce marketplaces, Snapdeal, has been conducted. The two tech behemoths are said to have talked about an all-stock transaction last month but there is no certainty over the completion of this deal. The talks are on hold at the moment but will resume if all stockholders agree with the said merger.
And do we really need to stress on who is the driving force behind these merger talks? Well, for the sake of clarity, China’s biggest e-commerce behemoth, Alibaba, is said to be the key player behind this rumored transaction. Alibaba currently holds a massive 40% stake in Paytm and a measly 3% stake in Snapdeal. Talking about this merger, a source says,
Snapdeal and Paytm have held talks to merge and this deal is driven by Alibaba
This might come as a boon for Snapdeal who has currently been cutting costs, making internal management changes after witnessing massive losses to the tunes of Rs. 3,300 crore. Recently, rumors of the homegrown e-commerce giant shrinking its workforce by 30% have also surfaced online. Also, some prominent senior-level executives have departed the company in search of better opportunities.
Paytm E-commerce is the spin-off entity of digital payments major Paytm. This entity is focused solely on the marketplace aspect of the company’s business. It has received a trove of capital from Paytm’s parent company One97 Communications but it has backing from founder Vijay Shekhar Sharma and Alibaba as well. The Chinese giant along with SAIF Partners has recently decided to lead a $200 million funding round into Paytm’s e-commerce entity.
But, one can also debate whether Alibaba might have ulterior motives behind this merger deal as the Chinese giant has been planning its entry into the Indian e-commerce ecosystem for quite some time now. The company has already hired some high-level executives to set up their initial Indian team. Alibaba has reportedly also been working with Paytm executives towards the integration of their e-commerce businesses.
If the merger of Snapdeal and Paytm E-commerce goes through, Alibaba will emerge as the largest shareholder in the combined entity. It will be joined by Japanese internet giant SoftBank, who has heavily invested in Snapdeal over the last couple of years. Also, this will be the case if no new investor decided to jump aboard this ship and pump capital into the business.
This merger, if it happens, is also expected to give Snapdeal the much-needed arsenal for finding solid standing ground and competing with its homegrown counterpart Flipkart and American e-commerce giant Amazon. Currently, Flipkart is leading the ecosystem both on sales as well as losses front. But, it is still the most trusted e-commerce company among consumers.