Jasper Infotech, the company which runs the e-commerce portal Snapdeal.com, is understood to have broadly arrived at a deal to raise $20 million through the private equity route, after some tough negotiations. While there were reports that the transaction can happen at a valuation of as much as $300 million, it is understood that the deal has been finalised at a lesser amount of $150 million.
"The valuation of $150 million is on a pre-money basis. My understanding is that $20 million may be raised first and then within a 60-day period they have an option in which an additional $10 million can be added to the round," an investment banker tracking this sector closely told Business Standard.
Snapdeal had earlier in August 2011 raised $40 million from Bessemer Capital, Nexus Partners and IndoUS Partners. It is understood that during the time it was valued around $150-$160 million and industry watchers are indicating that with valuations at the same levels, the condition of the e-commerce sector can be gauged. This move by Jasper comes at a time when many e-commerce companies are looking at various options to stay afloat and reportedly many of them looking at consolidating to reduce the burn rate. Another investment banker who is also working with a handful of e-commerce companies said that a few investors had valued Jasper Infotech around $100 million as well.
The management of Jasper Infotech could not be reached for their perspective.
Snapdeal, which started as an online deals provider, has over time changed into a full-fledged horizontal e-commerce company providing a host of products. It has been in the market to raise funds from the mid of last year and it is understood that they in discussions with global e-commerce player ebay as well.
According to Allegro Advisors, a boutique advisory firm, only 30 per cent of the funded e-commerce companies have managed to raise Series B. "While Series A is non-existent, there is drought in Series-B for e-commerce companies," said Deepak Srinath in his note on e-commerce fund raising. According to him, the capital required to achieve profitability is a factor of 10 of initial estimates and investors are trying to salvage investments via consolidation of companies.
"It is estimated that 70-80 per cent of the e-commerce companies are on life-support and are in dire need of funding," Srinath added. The report further added that inventory carrying horizontal players may require $200 million to get to profitability, while others may require around $80-$100 million.