Snapdeal snaps deal with e-commerce giant Flipkart

Snap­deal, the third largest e-commerce company, on Monday formally called off its much discussed $950-million takeover (over Rs 6,000 crore) by Flipkart over issues on valuation and terms, and is looking at an altogether new business model for survival.

According to sources in Snapdeal, the company will go ahead with a new business model and will cut cost by reducing staff and stopping non-performing business.

“The initiative to sell the company was started in May this year and the deal could not reach a finality even after going through several rounds,” a source told DH.

“Snapdeal has been exploring strategic options over the past several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result,” a company spokesperson said in a statement. “The company will now pursue Snapdeal 2.0, which is expected to help Snapdeal be financially self-sustainable,” the spokesperson said.

The decision of the Gurugram-based Snapdeal came less than a week after its board accepted the bid.

Analysts said the discussion was called off as Flipkart put forth multiple conditions, right from indemnity to a non-compete clause. Announcing the termination of merger talks, founders Kunal Bahl and Rohit Bansal said it is not going to be a successful model for e-commerce in India.

“In every market, there are multiple successful e-commerce businesses, and as long as one’s strategy is differentiated and has a clear path to success, there is a great company that can be built,” the employees were told.

The Jasper Infotech Pvt Ltd-owned company registered a peak valuation of about $6.5 billion in February 2016, and during the merger discussion it came down to $1 billion.

Starting off as a discount coupon seller 10 years ago, Snapdeal underwent many changes as it acquired several companies and became a pure marketplace model without managing its own inventory in 2012. Presently, the company has around 1,500 employees.

Commenting on the development, an analyst said the Snapdeal founders have the confidence to go solo as the sale of Freecharge has given them enough ammunition to sustain for six to eight years.

“Also, Snapdeal co-founders Kunal Bahl and Rohit Bansal in an e-mail to employees last week had indicated their plan to continue independently. The last revised offer of Flipkart of $900-950 million also didn’t enthuse the founders,” the analyst said.