Snapdeal-Flipkart merger talks stretch over fate of smaller units

Snapdeal's valuation has come down from $6.5 bn to less than $1 bn over the past year

It is not an easy task to orchestrate the biggest consolidation in Indian e-commerce history. 

Even as Flipkart goes through Snapdeal’s (which it intends to absorb) books of accounts, three separate sets of talks are on to decide on the other entities under the Jasper Infotech umbrella.

Snapdeal's valuation has come down from $6.5 billion to less than $1 bn over the past year. Three months earlier, SoftBank, the Japanese conglomerate and Snapdeal's largest investor, had initiated the process to sell the beleaguered online marketplace to bigger rival Flipkart.

A non-binding term sheet to start the due-diligence process by Flipkart for Snapdeal is expected to be signed in the next few days between the two parties.

Snapdeal founders Kunal Bahl and Rohit Bansal, and its investors, including Nexus Venture Partners (NVP), SoftBank and Kalaari Capital, are undecided on the fate of Vulcan Express, FreeCharge and Unicommerce, the three smaller units.

“There are separate discussions on for all the companies under the Jasper umbrella. The promoters and investors are still deciding whether they want to bundle the companies and sell to Flipkart or sell these separately to other players,” said a source close to the Snapdeal board of directors.  

While initial talks are on for Vulcan Express, logistics arm of Snapdeal, to be bundled in the merger with Flipkart, the board is also exploring options.

“If the board finds a better deal with any other bidder, it might swing the deal towards that side. TVS Logistics and Future Group’s logistics unit, Future Supply Chain Solutions, had shown interest in the Jasper firm,” added the source.

Unicommerce, the e-commerce management entity of Jasper, is one company which the promoters and NVP might stick with, at least for the near future. The company has made modest profit and could function independently without a need for additional funding. And, would help to keep the Jasper brand alive after the proposed merger. 

According to data from the registrar of companies, preference shares worth Rs 113.16 crore were allotted to existing backer NVP, to Bahl and Bansal in lieu of their 2015 acquisition of Unicommerce eSolutions. It was acquired by Jasper for an undisclosed amount. NVP had invested Rs 96.26 crore in the firm.

“The investors have not shown much keenness to sell this particular firm. They would rather sit on this investment, rather than make it part of the present fire sale,” said the source. 

Jasper’s online wallet company, FreeCharge, has signed a non-binding term sheet (the term for a short document outlining the material terms and conditions of a business agreement) with Paytm, the Delhi-based electronic payment and e-commerce company,  which is interested in acquiring it. Paytm says it will buy only if the company adds enough value to the merchant base and is priced correctly. 

Till now, FreeCharge has had discussion with a number of sectoral entities, including MobiKwik and PayPal, but has not found takers. Flipkart has also not shown much interest in acquiring this particular brand and wants to make its in-house wallet, PhonePe, bigger.

NVP could get close to $80 million and a stake in the merged or new entity, while Kalaari could get $70-80 mn. Snapdeal co-founders Kunal Bahl and Rohit Bansal should get around $60 mn for their present 6.5 per cent stake.