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Snapdeal arrives at deal to raise $20 mn

Valuation beaten down to $150 million; It had earlier raised $40 million in August 2011

Raghuvir Badrinath  |  Chennai/ Bangalore 

Jasper Infotech, the company which runs the e-commerce portal, 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 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 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 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.

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First Published: Fri, March 29 2013. 20:51 IST