India’s second-largest home-grown online retailer, Snapdeal has retained a ‘board observer’ status on ecommerce logistics venture GoJavas, after its nominees have stepped down as directors with the change in management early this month.
Hardeep Mohinder Singh and Jayant Sood, the nominated directors of Jasper Infotech Pvt. Ltd (which runs Snapdeal) on the board of Quickdel Logistics Pvt. Ltd—the firm behind GoJavas—had resigned from their positions earlier this month. This is despite Snapdeal having the right to nominate one director on the board of GoJavas.
Anand Rai, director of another logistics firm Pigeon Express Pvt Ltd, who has taken over the reins of GoJavas, as first reported by VCCircle, has the right to two board seats.
The board observer status gives Snapdeal a tight leash on the affairs of Quickdel Logistics even as it has kept an exit window for itself from the company.
Snapdeal has got a put option to sell its entire holding in the firm to Rai, filings with Registrar of Companies (RoC) show. According to the amended Article of Association of Quickdel, Snapdeal has the put option to sell its shares to Rai at a minimum value of Rs 4.43 a share by 11 August, 2017.
If it opts for this and at the lower threshold, it would be virtual write down of investments as it had picked shares at Rs 3,160 each last year.
Snapdeal had initially picked around 30% stake in GoJavas for Rs 180 crore and later bought additional stake in the firm.
Rai, managing director of Quickdel Logistics, acknowledged that Snapdeal nominees have stepped down from the board and that the e-commerce firm shall only have a board observer role. He did not comment on Snapdeal’s put option.
Snapdeal spokesperson said it continues to remain invested in GoJavas. “We continue to work closely with Vulcan, GoJavas and other logistics partners to deliver the fastest across the country,” the firm added.
Vulcan, the in-house logistics arm of Snapdeal, is one of the reasons why GoJavas found itself in a tough spot. It even had to temporarily suspend operations on August 2 citing technical reasons.
Launched as an in-house logistics service provider for Rocket Internet-backed online fashion retailer Jabong, it was spun off as an independent third-party logistics firm in 2013. The firm was partly owned by Praveen Sinha, founding team member of Jabong. Randhir Singh and Ashish Choudhary are the other two persons behind the firm.
It attracted Snapdeal as a strategic investor last year and the e-commerce firm was looking to buy a majority stake. But the firm faced allegations of financial irregularities. The deal didn’t materialise on account of differences between the two firms over valuation.
Post the fallout, Snapdeal pulled out most of its business from GoJavas and shifted focus to its own logistics unit called Vulcan Express even as it continued to remain invested in the firm. This coincided with Jabong ending up in the hands of the country’s largest e-commerce company Flipkart, which already has its own logistics firm.
With two of its big clients—Snapdeal and Jabong—gone, and some top-level exits along with the allegations of fraud, GoJavas fell off track and was soon facing a closure.
The exact contours of the latest transaction is not clear, but Sinha, Singh and Choudhary, who are listed as ‘founders’ of Quickdel Logistics, have exited the venture. Pigeon’s Rai is now counted as a major shareholder.
Rai is looking to rebuild the firm that lost business over the last few months.
The firm has resumed operations and the management is now looking to increase the existing load of 10,000 orders a month and aims to add 36,000 PIN codes to its delivery network in the next six months.
“Over-paid staff and lack of knowledge of the business had led to the downfall of GoJavas,” he told VCCircle.
Rai is now looking to tie up with more B2B players and might tie up with banks to facilitate their logistics verticals including courier of cheque books.
He said there is no plan to merge GoJavas with Pigeon, but did not delve into what happens to the warehousing unit of GoJavas.
As first reported by VCCircle, this business unit, GoFill, is not part of the deal. GoFill includes warehousing, storage, packaging and inventory.
Rai said he doesn’t have much knowledge about the warehousing unit.
“It could be a possibility that he (Praveen Sinha) will run the operations of GoFill,” he added.
Praveen Sinha did not respond to an e-mail query.
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