Nexus still holding out on merger of Flipkart-Snapdeal

SoftBank needs a final, crucial, aye from Nexus Venture Partners, an early investor in online marketplace Snapdeal, to deal on the proposed merger of the latter into larger rival Flipkart.

However, with the most to lose from the acquisition, the venture capital (VC) entity is trying for a hard bargain. SoftBank, the Japanese investment firm which has a majority stake in Snapdeal, is looking to close the deal this week, sources said.

Softbank began the conversation last month, to urge a merger of Snapdeal into Flipkart. Since then, it has engaged NVP and Kalaari Capital, early investors in Snapdeal, to agree on terms for a fire sale of the Delhi-based e-commerce platform, in return for a stake in Flipkart. Both VC entities had wanted SoftBank to give a higher valuation, by including Snapdeal units Vulcan Express and Unicommerce in this.

Kalaari reportedly finally came on board last week to SoftBank's terms but NVP is still to do so; it wants the best deal possible on its $12 million (Rs 78 crore) investment in Snapdeal (for which it holds 12.2 per cent stake).

Kalaari and Nexus both have the power to block a deal. SoftBank wants to buy out the stakes of both at a Snapeal valuation of a little over a billion dollars. However, Kalaari and Nexus were pushing for a valuation of at least $3.5 bn. At its peak, Snapdeal was valued at $6.5 bn.

According to people close to the deal, Nexus' reluctance is because it has the most to lose. Kalaari did sell a percentage of its holding in secondary stake sales; Nexus hasn't and held on to its investment.

"Discussions with Nexus are on. They are reluctant on the valuation but I believe SoftBank would be able to convince them in the next few days. The deal would be complete in the next few days," said an informed source.

The two dissenting investors contend that not all of Snapdeal is loss-making. Vulcan Express, the logistics arm, and Unicommerce, the e-commerce management entity, are either profitable or would be so in days to come.

SoftBank, which invested $900 million (Rs 5,800 crore) in Snapdeal, holds a majority stake in the e-commerce entity and its payment unit, FreeCharge. It is looking to spend as much as $1.5 bn for a double-digit stake in Flipkart, which the latter's main investor, Tiger Global, plans to offload.

FreeCharge, a mobile wallet service, is also on the block. According to sources, SoftBank is trying to separately sell it and has been looking for buyers. Jason Kothari, recently appointed as chief executive of FreeCharge, has been reportedly meeting investors from China and America in this regard. PayPal was initially interested but the deal could not be closed. There has also been talk of FreeCharge being sold to Paytm, Flipkart and MobiKwik.