Friday 17 April 2015

SoftBank may put more money into Snapdeal

Japan’s SoftBank could well be the answer to Kunal Bahl-led Snapdeal’s search for fresh funds, at least partially.

SoftBank, already the largest shareholder in Snapdeal, is interested in raising its stake in the New Delhi-based online marketplace through further infusion of money into the company, it is said. SoftBank currently has around 30 per cent stake in Snapdeal, due to its $627-million investment in the company last year.

Snapdeal, a rival of Flipkart, has been on the deal street for raising fresh funds in order to muscle up for the growing competition in e-commerce. The company is in talks with multiple investors, but some negotiations, including with Alibaba, have been stuck over valuation, sources have said. A deal with SoftBank is a possibility, according to a person close to the development.

When contacted, a Snapdeal spokesperson said in an email response, “These are speculations and we do not comment on speculations.” SoftBank did not respond to an email sent by the Business Standard.

In a recent interaction with the Business Standard, Rohit Bansal, co-founder and chief operating officer, had said receiving investment from SoftBank could not be ruled out. “If it's right for us, why not?” he had said.
Snapdeal raised close to a billion dollars last year while raised about $2 billion. The Bengaluru-based company is close to announcing fresh fund-raising of $600 million, according to sources.

Snapdeal is looking for fresh funds as it is spending hefty amounts for acquisitions, technology upgradation, customer acquisitions, and fuelling the discount model. Snapdeal is believed to have allocated about $1 billion for acquisitions this year. Of these, the acquisition of FreeCharge, the biggest so far, was recently closed. It has closed three acquisitions this year, while it is aiming to seal another two or three this year.

The firm will also be spending about $100 million at its Bengaluru innovation centre over three years.

Mobile, multimedia, Big Data, and language are some areas in which Snapdeal plans to strengthen its presence.

The other key investors in Snapdeal are eBay, Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital and Saama Capital, Temasek, BlackRock Inc, Myriad, PremjiInvest and Tybourne, and IndoUS Venture Partners. Ratan Tata, too, has invested in Snapdeal in his personal capacity.

Snapdeal targets a gross merchandise revenue of $9-10 billion this year, while Flipkart aims at $8 billion. Both companies are burning sizable cash every month. According to sector sources, Snapdeal’s burn rate is $20-25 million a month, while Flipkart’s is around $40 million a month.

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