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Snapdeal gets another suitor, putting Flipkart on ice
BI Intelligence
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Kunal Bahl and Rohit Bansal, the founders of Snapdeal, India’s third-largest e-commerce marketplace, are reportedly intent on merging the company with Indian digital media and e-commerce conglomerate Infibeam, according to Inc42.
The news casts doubt over a possible merger between Snapdeal and Flipkart, India’s biggest e-commerce player, despite months of negotiations between the two. Flipkart offered $850 million last week for Snapdeal, while Infibeam is only offering $700 million, but Bahl and Bansal are reportedly pushing for the Infibeam deal as it would allow them to retain their positions at the head of the company. If the Infibeam deal doesn’t come to fruition, Snapdeal plans to downsize and continue to operate independently, Inc42 reports.
Failure to land an agreement with Snapdeal would be a significant blow for Flipkart, which is under increasing pressure from Amazon. Flipkart has struggled with organic growth recently — its unique purchasers only grew 11% from Q1 2016 to Q1 2017, compared with 113% growth for Amazon, according to data from research firm 7Park Data. And while the company has turned to acquisitions to help boost its business — it bought out eBay’s India business earlier this year — it remains at risk of ceding its top spot in the Indian e-commerce market to the US company. Bringing on another major domestic player like Snapdeal would go a long way in helping Flipkart hold onto its lead.
Meanwhile, Snapdeal faces an uphill battle if it fails to find a buyer and continues to operate independently. The company has been losing market share and laid off more than 500 employees earlier this year. As a result, its investors appear hungry for a sale — Snapdeal’s biggest investor, Japanese tech conglomerate SoftBank, had been pushing for a merger with Flipkart, with the intention of acquiring 20% of the merged company. Moreover, both Flipkart’s and Infibeam’s offers are far below the $6.5 billion valuation the company received when it closed new funding early last year. Given its continuing losses and increased competition, investors will likely keep pushing Snapdeal to find a buyer. Infibeam is also a much smaller player in the Indian e-commerce market, so investors could be more amenable to selling to market leader Flipkart.
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