Snapdeal is currently at the do or die stage due to an internal conflict between its investors, suggest fresh reports. Over the past year, the homegrown e-commerce giant has been plagued with a massive cash crunch and had to shrink its operations and team to adopt a leaner structure to stay afloat. It even drove the co-founders to take 100% salary cuts.
The company could’ve easily raised fresh funds but it reportedly missed out on two instances due to a feud between its investors. As per a report from LiveMint, the company missed out on two offers in the past six months due to a rift between investors on its board of directors.
The report suggests that the clash is between early and powerful Snapdeal investors Kalaari Capital and Nexus Venture Partners on one side, and SoftBank Group Corp., which is the company’s largest shareholder, on the other side.
And the reason behind the rift is the e-commerce company’s valuation in a potential fundraising round, said the people aware of this matter on condition of anonymity to LiveMint.
This boardroom battle has resulted in Snapdeal not being able to raise a new funding round, adding to the continued cash crisis at Snapdeal’s parent Jasper Infotech Pvt. Ltd. Since the start of this year, the e-commerce behemoth has been plagued with a rather unfortunate situation and has cut hundreds of jobs, slashed spending on discounts, as well as marketing, and saw a sharp decline in monthly sales.
Over the past six months, SoftBank has offered to invest at least once in both Snapdeal and its digital payments unit Freecharge. The proposed deal would have lowered Snapdeal’s valuation (including Freecharge) to less than half the $6.5 billion that it fetched in its last funding round in February 2016. The deal was reportedly rejected by Kalaari and Nexus as the valuation drop would have led to a significant increase in SoftBank’s stake and a corresponding slide in their ownership.
A few days ago, there were reports suggesting that the Gurgaon-based e-commerce firm is in talks for a potential sale of its business to either Flipkart or Paytm. However, it appears that this rumored transaction, even if it’s happening, will not especially go down easily. The differences between these board members may further complicate the matter.
The reports say that SoftBank has initiated talks with Paytm and Flipkart to sell Snapdeal. It further suggests that SoftBank may also put up as much as $50 million in cash to tide Snapdeal over until a merger materializes. But, for such a deal to happen, the company’s other board members may need to be bought out or be convinced to take a large cut on their investments.
When SoftBank offered the cut-price deal, Kalaari and Nexus asked the Japanese investor to buy at least part of their shares in the company, to which SoftBank refused.
As per the documents filed with Registrar of Companies, SoftBank owns 33% in Snapdeal, while Nexus owns roughly 10% and Kalaari nearly 8%. SoftBank has already pumped roughly $900 million into Snapdeal. For Kalaari and Nexus, a lot rides on Snapdeal as this is their biggest bet and could be crucial to the success of the two Indian venture capital firms.