India’s e-commerce market could well have a makeover, with reports suggesting that Snapdeal’s largest investor, SoftBank’s intention to merge it with Flipkart. While company representatives have not confirmed any such move, SoftBank is keen to take this move ahead.
Snapdeal has been plagued with financial issues after failing to generate new funds, sacking a number of employees over the last few months. SoftBank has a 30% stake in Snapdeal, whose valuation stood at $6.5 billion as of 2016.
The Indian e-commerce segment has seen a number of mergers in the past, with Flipkart acquiring Myntra and Jabong in 2014 and 2016 respectively. The combined entity is the biggest player in the market, commanding a 34 per cent share. Rival Amazon has a 25 per cent market share, with Snapdeal coming third with an 8 per cent share.
If the merger materialises, it would give the combined entity an advantage over Amazon, which has been investing huge sums in the market.
According to reports, SoftBank has given Snapdeal three options- merger with Flipkart, join hands with Paytm, or write-down SoftBank’s investment in the company.
Flipkart, which is currently valued at around $11 billion has also seen a slip in its valuation, owing largely to huge discounts offered on the website.
The deal, if it goes through, would involve a share sale by Tiger Global, the largest investor in Flipkart. This sale is likely to be around $1 billion, or 10 per cent of Tiger’s 30 per cent stake in Flipkart. SoftBank is keen to invest $1.5 billion in the combined entity, giving it 15 per cent stake.
Tiger Global would continue to own around 20 per cent.
SoftBank founder Masayoshi Son has exhibited personal interest in the deal, betting big on the growing Indian e-commerce segment.