The potential merger between Indian e-commerce companies Flipkart and Snapdeal continues to hang in the balance with a crucial board meeting of Snapdeal ending inconclusively on Tuesday, two persons aware of the proceedings told VCCircle.
The meeting couldn’t break the logjam between Japanese telecom and Internet conglomerate SoftBank Group Corp, Snapdeal’s largest investor, and early investor Nexus Venture Partners, the persons said, asking not to be identified.
A CNBC-TV18 report said Nexus is now seeking a higher stake in the merged entity. The report said Nexus changed its earlier stance of selling its entire stake in Snapdeal. VCCircle couldn't verify this.
"There are still some issues between Softbank and Nexus which they are working on," said one of the persons cited above.
If Nexus chooses to swap stake, it could end up with
under 1% stake in Flipkart, assuming Snapdeal is valued at around $1 billion, according to VCCircle estimates.
Over the past few weeks, Flipkart and Snapdeal have been seemingly giving the final touches to what could be the biggest deal in the Indian e-commerce sector. The proposed merger hit a hurdle when Kalaari and Nexus reportedly objected to Snapdeal’s proposed valuation for the merger.
Nexus first invested in Snapdeal in January 2011 during the e-commerce firm’s Series B round via its Nexus India Direct Investments II fund.
The fund invested six more times, participating in Snapdeal’s Series C, D, E and E1 rounds. Additionally, a separate fund named Nexus Opportunity Fund invested in Snapdeal’s Series E round. In total, Nexus invested Rs 210 crore in Snapdeal between 2011 and 2014, picking up close to 10% stake. It has not sold its stake to date.
If the Flipkart-Snapdeal deal goes through at a valuation of $1 billion, Nexus will make a modest three-fold return of Rs 652 crore and earn an estimated internal rate of return (IRR) of 28-30% on its six-year-old bet.
So far, SoftBank has been able to get Kalaari Capital, another early-stage investor in the e-commerce firm, to agree to the terms of the deal. SoftBank, which has pumped over $900 million into Snapdeal, has two seats on its board while Kalaari Capital and Nexus have one each.
Snapdeal’s other investors include SoftBank-backed Chinese e-commerce company Alibaba, Taiwanese contract electronics manufacturer Foxconn, eBay Inc., Indian media company Bennett Coleman & Co. Ltd, and venture capital investors such as Bessemer Venture Partners, Intel Capital, Iron Pillar and Tata Sons chairman emeritus Ratan Tata. The company has raised $1.65 billion in total till now.
Two weeks ago, VCCircle had reported that Snapdeal’s founder Kunal Bahl and Rohit Bansal had hired law firm Cyril Amarchand Mangaldas to advise them on the planned merger.