Snapdeal, a Softbank-backed e-commerce business, has filed preliminary filings with India’s securities regulator, the Securities and Exchange Board of India (SEBI), to seek capital via an initial public offering (IPO).
Snapdeal IPO‘s draft red herring prospectus revealed that the Gurugram-based business plans to raise INR 1,250 crore via the sale of new shares while existing investors such as Softbank want to sell roughly 3.07 crore secondary shares.
Snapdeal founders Rohit Bansal and Kunal Bahl will not dilute their interest in the firm in the IPO, which was once a contender for the crown in India’s expanding but competitive e-commerce sector, alongside Flipkart and Amazon. Bansal and Bahl own roughly 20% of Snapdeal, while Softbank owns around 35% of the company.
Snapdeal IPO‘s registration comes as a slew of internet-based businesses, including Paytm, Zomato, Nykaa and Policy Bazaar, have chosen to go public to seek capital. Snapdeal plans to utilize the new funds to finance organic development efforts, enhance logistical capabilities, and improve its technology infrastructure.
However, the firm said in the DRHP that it experienced negative cash flows for the six months ending September 30, 2021, as well as the previous three financial years, and that it may continue to do so in the future. Snapdeal also said that its losses might persist.
Snapdeal, which was founded by Bansal and Bahl in 2010, peaked at roughly $6.5 billion in February 2016. The next year, it turned down a proposed $1 billion takeover by Flipkart, which was backed by Softbank. Following that, the firm consolidated its operations by cutting off half of its personnel and selling important assets such as Vulcan Express and Freecharge, whereby it eventually turned its business model to cater to value-conscious buyers.
Snapdeal IPO: An Opportunity Worth USD 39.4 Billion
As an ecommerce website, Snapdeal was started in 2010. It entered the online retail market to compete with Amazon and Flipkart, which is now owned by Walmart Inc. Masayoshi Son’s SoftBank Group pushed for a merger with Flipkart in 2017, when the company was battling to stay afloat, but the proposal fell through.
Due to cash flow issues and competition, it was forced to downsize and transition to a value-driven online retailer for non-affluent, non-urban, and non-tech savvy Indians. Everything from apparel, blankets, and table mats to trimmers is available on Snapdeal.
Snapdeal claims to be the biggest pure-play value e-commerce platform by revenue in a sector predicted to expand fivefold to USD 39.4 billion by FY26, according to its draft prospectus.
The Gurugram-based company makes the most of its money from the fees it charges sellers for marketing, freight, and collection. To recruit consumers and boost delivered units and income, it eliminated shipping or cash-on-delivery expenses in April 2021.
“Emerging consumers” from India’s tier 2+ cities are expected to boost development, according to the firm. According to Snapdeal, using RedSeer research, the value shopper base is expected to triple to 25.6 crore by 2026. It also has one of the most extensive ranges of items priced under INR 600, according to the company.
Unicommerce eSolutions Pvt., a Snapdeal company, provides software as a service to enable conventional direct-to-consumer companies and other merchants to sell online. It accounts for around 11.13 percent of the company’s revenue. Snapdeal also wants to bring in local retailers and new franchisees to help with distribution, similar to how JioMart does with groceries.