SoftBank-backed Snapdeal, once worth $6.5 bn, aims for $1.5 bn IPO valuation

 SoftBank-backed Snapdeal, once worth $6.5 bn, aims for $1.5 bn IPO valuation

Snapdeal Ltd, the e-commerce platform that once competed with Walmart-owned Flipkart and Amazon’s India arm, plans to float an initial public offering that may value it around a fourth of what it was worth six years ago.

The company has filed a draft proposal with the Securities and Exchange Board of India (SEBI) to launch an IPO as it looks to benefit from a rapid rise in Indian stock markets thanks to abundant liquidity.

New Delhi-based Snapdeal, previously known as Jasper Infotech Ltd, is looking to raise Rs 1,250 crore in fresh capital through the IPO. The offering also includes a sale of 30.769 million shares by eight of its existing 71 shareholders through the secondary route.

Japanese conglomerate SoftBank Group Corp and Taiwanese electronics contract manufacturer Foxconn Technology Group plan to sell nearly a fifth of their stake to partially exit what could be among their worst India bets. SoftBank owns a 35.41% stake in Snapdeal while Foxconn holds 4.38%.

Canadian pension fund Ontario Teachers’ Pension Plan Board, Sequoia Capital, and mid-market private equity firm Madison Capital also plan to sell shares. Founders Kunal Bahl and Rohit Bansal are not selling any shares.

A successful IPO and listing will push Snapdeal into the list of new-age internet companies that have recently gone public. These include One97 Communications, which operates digital payments platform Paytm, beauty and personal care e-tailing brand Nykaa and online insurance aggregator PolicyBazaar.

The IPO size is pegged at roughly Rs 1,700-1,900 crore ($225-250 million at current exchange rates), two people in the know told The Capital Quest.

The IPO might value Snapdeal around Rs 11,500 crore ($1.5 billion). However, this could change as the company gets closer to the IPO launch date and announces a price band.

Still, the estimated valuation that Snapdeal is aiming for is well below its peak. Snapdeal has suffered a huge markdown in valuation from the $6.5 billion tag in early 2016 as it failed to compete with Amazon and Flipkart.

A failed attempt to merge with Flipkart, which valued Snapdeal at less than $1 billion in 2017, made matters worse. But the company has been trying to turn its fortunes around over the past three-four years and is now focusing on smaller cities and towns instead of top-tier metros and large cities.

The company was said to be eyeing about $2.5 billion in valuation through the IPO in the third quarter of this year. However, Paytm’s disastrous IPO and listing trimmed its valuation outlook by 30-40%.

Another reason for the downward revision in its valuation may be attributed to the mounting losses in the six months ended September 2021.

Snapdeal narrowed its consolidated loss by 55% to Rs 125.40 crore for the fiscal year ended March 2021 on revenue from operations of Rs 471.75 crore.

However, for the six months ended September 2021 its losses stood at Rs 177.07 crore. At that run-rate, it may well be on course to post a loss in the range of Rs 300-350 crore as the revenue rate remains steady.

To be sure though, revenue fell 45% in 2020-21 from Rs 846.39 crore the previous year.

Given the profitability track record and to safeguard small investors, the company has reserved 75% of its shares for institutional investors, 15% for non-institutional investors and 10% for retail investors.

In a typical IPO, 50% of the book is reserved for institutional investors, 15% for non-institutional investors and 35% of the shares are set aside for retail investors.

Ankit Doshi

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The Capital Quest