Numbers game: Snapdeal board set to unlock Flipkart deal

Kunal Bahl-led firm's board to meet this week to clear roadblocks

After months of Snapdeal being a buy-out target in the volatile e-commerce market, sources close to the development have told Business Standard that the deal has not progressed, as Bengaluru-based Flipkart hasn’t yet got access to the financial books and key data related to the Kunal Bahl-led firm. 

But, things could possibly change, as the Snapdeal board is set to meet this week in a bid to clear the roadblocks for the biggest consolidation in the sector, it is learnt. 

The six-member Snapdeal board, comprising the two company founders (Rohit Bansal and Bahl), two nominees of the largest investor SoftBank and one each from early-stage investors — Nexus Venture Partners and Kalaari Capital — is expected to take a call on various sticky issues in the upcoming meeting. The attempt at this week’s meeting will be to bring the two founders and Nexus, who continue to oppose the proposed merger deal with Flipkart, on the same page as Masayoshi Son-led SoftBank. 

Only when there’s a consensus among the investors on the deal can the Snapdeal board give a go-ahead to unlock the data room that can then be evaluated by Flipkart’s investors, legal team and its board, a source pointed out. While SoftBank, the Japanese internet conglomerate and lead investor in Snapdeal, has been trying to stitch the deal together for the past three months, Kalaari and Nexus were backing the founders in blocking it. Recently, Kalaari is learnt to have come on board as well, leaving only Nexus vetoing the deal. 

Due to no access to data, there was no common term sheet on the table even after months of negotiation, said a source close to the board. “Has Snapdeal been looked at and priced? The answer is no. Has someone given intent? Yes, Flipkart proactively gave that,” the person added.

Another source said that SoftBank has hammered out a term sheet which Nexus may agree with now. That will allow the Snapdeal board to open its data set to Flipkart and a valuation can be agreed upon for a possible deal. According to a source, Snapdeal may not be in a position to hold out for long, as it’s fast running out of cash reserves. The founders, however, are asking for a better deal to exit the venture, he added. Founders want around $40 million each at a company valuation of close to $2 billion, another source said. Nexus, on the other hand, is looking at a payout of $80 million at least, as it had put in around $45 million in the company. These figures could not be independently verified.

Initial talks in the ongoing merger deal indicated that the Snapdeal valuation was pegged at lower than $1 billion, even as it was valued at $5 billion in August 2015, when it raised $500 million from a consortium of Alibaba, SoftBank and Foxconn. The company’s valuation had peaked last February at $6.5 billion, when it raised $200 million from Ontario Teachers’ Pension Plan and others.  

Snapdeal, in an emailed response, said while the board had access to the data, it had not given the information to outsiders, as there was no such direction from the e-commerce company’s board.

“The board has full and complete access to all company information required by it. The company is, as always, guided by the instructions and advice of the board in all matters. It cannot provide information to external entities, in the absence of a board direction in this regard,” the Snapdeal spokesperson said. Nexus did not reply to queries from Business Standard.

SoftBank currently owns 33 per cent, while Nexus has 10 per cent and Kalaari around eight per cent stake in the online marketplace, according to documents filed with the Registrar of Companies. The founders hold a total of 6.5 per cent in Snapdeal, and the remaining is with other investors.

*Major investors include SoftBank Group Corp, Alibaba Group, Temasek Holdings, Bessemer Venture Partners, Kalaari Capital, eBay, Nexus Venture Partners & Ratan Tata. Graphics: Vikash Sharma