New Delhi: Japanese investor Softbank is keen for a merger of Snapdeal with its domestic rival Flipkart, Moneycontrol reported on Tuesday, citing sources. This will result in a significant consolidation benefitting an industry struggling with losses and tough competition.
Earlier, Moneycontrol had reported that the Japanese telecom and internet group, which owns over 30 percent in Snapdeal, will most likely pump in a whopping USD 1.5 billion in the merged entity, and will hold about 15 percent stake in it.
The merger will give Flipkart's largest investor Tiger Global an opportunity to sell shares worth USD 1 billion. Tiger holds roughly 30 percent stake in Flipkart.
Softbank has charted out three action plans for Snapdeal. It could merger with Flipkart, join hands with Paytm or risk a write-down of Softbanks investment to zero.
A strong case could be made for rescuing Snapdeal from its troubles since it has been reeling under mounting losses triggered by discounts and ad spends.
Snapdeal will be hitting the pause button on a few of its operations and will also give up office space.
Increasing expenses have weighed down on Snapdeal which is in talks with Delhi-based ASF Infrastructure to give up a part of its 0.5 million sq feet Gurgaon office.
It is a tough road ahead for the e-tailer that saw its position slip from no.2 spot to three and losses amounting to Rs 3,316 crore in the year ended March 31 2016. The company had also spent nearly Rs 200 crore on advertising and marketing to beat competition.
It was always not so bad. Two years ago the company had spent a large sum of Rs 250 crore to lease office space for its 4,000 employees. But, as things didn’t go well with the company it decided to show the exit door to 600 employees last month.
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