Game of stakes: SoftBank pulls out of $150-200 mn funding in Snapdeal

In what signals worsening board room crisis at home-grown e-commerce firm Snapdeal, its biggest stakeholder SofBank has backed out of a $150-200 million debt-financing agreement, a leading financial daily reported on Monday.

SoftBank’s withdrawal from the three-year debt offering reaffirms its intent to either effect a sale or merger of the Jasper Infotech Pvt. Ltd-run e-commerce firm, The Economic Times reported citing numerous people aware of the development.

Following this, early investors Kalaari Capital and Nexus Venture Partners are "livid and have questioned SoftBank about its intention", the report added. SoftBank, which has pumped over $900 million into Snapdeal so far, has two seats on the company's board while Kalaari and Nexus have one each.

It appears that Softbank is leading all the talks related to a potential sale or merger of the troubled e-commerce firm.

A spokesperson from SoftBank declined comment while queries sent to Snapdeal, Kalaari and Nexus Venture did not elicit a response at the time of filing this report.

The development comes on the heels of Kalaari and Nexus clashing with SoftBank over its offer to invest in the e-commerce firm and its mobile wallet subsidiary FreeCharge, wherein it proposed a valuation that was less than half of the $6.5-billion that Snapdeal racked up in its last funding round in February 2016. Kalaari and Nexus rejected the offer “as the valuation drop would have led to a significant increase in SoftBank’s stake and a corresponding slide in their ownership". That clash has already cost the company at least two funding rounds over the last six months, the Mint newspaper had reported last week.

While Kalaari and Nexus pushed for a secondary sale of their stakes, Softbank preferred a direct cash infusion, the Mint report said.

Last week, PTI had reported that Snapdeal had initiated the process for an initial public offering and zeroed in on five merchant bankers, including SBI Caps and Kotak Mahindra Capital, besides top law firms Amarchand Mangaldas, AZB & Partners and Khaitan & Co.

The investor feud aside, Snapdeal has been grappling with dwindling sales, mounting losses and massive layoffs. It has also been exploring a potential merger or sale with either Paytm or Flipkart, but the talks, it seems, are at the preliminary stage. Besides, according to several media reports, Snapdeal has been scouting the market for months to raise its next round of funding, the chances of which seem bleaker by the day.

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