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Snapdeal founders and minority stakeholders declared their vision to get Snapdeal follow their own path and not bow down to Softbank efforts to get merged with Flipkart any more. The company founders Kunal Bahl and Rohit Bansal backed out from the Snapdeal Flipkart merger deal.
Why did this happen?
The existing investors of Snapdeal are not satisfied with the price money/stakes they are being offered in the merger. In the beginning, the negotiation was pegged at $900 million but dipped to as low as $400 million. Softbank even went ahead and arranged for $500 million for this deal to happen however wasn’t successful in getting that to closure
On the other hand, the founders have a deep desire within to get the firm growing and continue to strive for survival till the last breath.
Also the minority stakeholders are still of the opinion that merger may only result in loss, but pushing Snapdeal to strive for survival still has a chance to grow their investments.
INR 385 Crores from Axis Bank, How long will it last for?
With the Freecharge sold to Axis Bank for INR 385 Cr, Snapdeal which has the headcount of around 1200 will have to give pink slips to more than 75-80% of their employees as the funds will again see a wash down if not utilised as “Survival Funds”.
Snapdeal has an operating expense per month of INR 160Cr in the current fiscal and on the other hand it had only raised INR 140 Cr in the current year, due to its devaluation. The company also didnt raise much amount in the previous year (only $221 Mn). Current cash burn rate of the company and the incumbent revenues will force the management to layoffs substantial headcount in order to save funds to survive. Snapdeal so far has raised a total sum of $1.56 Bn.
Hence it can be expected that with this move around 900-1000 employees may be asked to leave and the company may operate with only 200 – 300 employees.
How will the Ecommerce Market be affected or impacted due to this?
Snapdeal’s share in the market will substantially dip because of the decision, and with behemoths like Alibaba, Amazon and Flipkart, it shall not be easy task for Snapdeal to look for a steady growth. Hence, it could be expected that atleast till the end of fiscal year 2017, Snapdeal cannot be accounted or attributed to any positive or negative change in the ecommerce domain because of it significantly lower size now.
On the other hand, Flipkart vs Amazon vs Alibaba (Paytm) is going to get into a war to hold supremacy than the other two. Eventually money shall not be a problem for all of the listed warriors and some greater and newer dynamics will be brought, to further disrupt the ecommerce in India.