VCC Startups weekly wrap: Oyo-Zo merger dissolves; Snapdeal’s legal woes escalate

VCC Startups weekly wrap: Oyo-Zo merger dissolves; Snapdeal’s legal woes escalate

By Anirban Ghoshal

  • 28 Oct 2017
VCC Startups weekly wrap: Oyo-Zo merger dissolves; Snapdeal’s legal woes escalate
Credit: Shah Junaid/VCCircle

The supposed acquisition of Zo Rooms by online budget hotel aggregator OYO has come undone, according to a statement issued by the latter. However, Zo Rooms refuted OYO's claims, triggering a bitter spat between the SoftBank-backed startup against its Tiger Global-backed rival, which has already ceased operations.

As the slugfest between Amazon and Flipkart intensifies, the Seattle-based global e-commerce major has suffered record losses in its international business mainly on account of its investments in India.

Snapdeal's fracas with other firms escalated this week as its estranged partner GoJavas approached the Economic Offence Wing, while in an unrelated development, Paytm Mall said it would pursue legal action against Snapdeal-owned Unicommerce for alleged data misuse. InMobi's marketing chief and Snapdeal's CTO left their firms.


OYO, Zo Rooms cross swords over acquisition shrouded in mystery

The mystery behind the merger of OYO and Zo Rooms deepens as both companies sent out releases with divergent claims. First, OYO said it had called off the acquisition talks with Zo Rooms. But Zo later claimed OYO had acquired its entire business in March 2016 and was now abandoning its contractual obligation.

“In late-2015, OYO had explored a potential acquisition of Zo Rooms. The non-binding term sheet for this deal already stands terminated in September 2016. Following this, we tried to identify potential value in their business, but could not reach an outcome. We can now confirm that OYO has ended all discussions on the matter,” OYO, run by Oravel Stays Pvt. Ltd, said in an emailed statement.


Zo Rooms refuted the claim made by OYO, saying, “As a matter of clarification, Zo states that OYO is resiling from the contractual terms after acquiring the entire ZO Rooms business by March 2016. This is not an act in good faith.”

Amazon's international losses soar on India investments

As Amazon doubles down on its investments in India, its international losses soared to $936 million during the three month-period ending September. Amazon chief financial officer Brian Olsavsky, during the firm’s earnings call, hinted that heavy investments into India was the major reason behind the losses. “On the international, yeah, I can’t split it, the effects, but I will tell you again, it is international expansion and primarily in India where we’re continuing to add benefits,” he said.


“We launched Prime there a year ago… and we’ve had more Prime members join in India than in any other country in the first 12 months. We have free shipping on 10 million items there and we’re continuing to add benefits: Prime Video, Amazon Family,” he added. Meanwhile, its India chief Amit Agarwal told the media that the company would step up investments on various fronts, especially in its digital payments and the Prime membership programme. In 2014, the company had invested $2 billion in India and had committed another $3 billion in June 2016, taking its total investment in the country to $5 billion.

SoftBank Group joins e-commerce lobby group Indiatech

Japanese Internet and telecom giant SoftBank Group has joined the Indian industry body that aims to represent local ventures seeking protection from resourceful global rivals.


Confirming the development to VCCircle, a SoftBank spokesperson said the firm is one of many venture capital investors extending their support to the group, which is spearheaded by Flipkart, Ola, and MakeMyTrip. “SoftBank is one of several other investors including Matrix and Kalaari and Indian Internet businesses such as Ola, Flipkart and Hike who are supporting Indiatech. Our intent is to work with the government to support the development of the rapidly evolving Internet ecosystem in the country and we hope the organisation would facilitate this,” the spokesperson said in an email response.

Festive roundup: Flipkart, Amazon claim top slot; Snapdeal stays in green zone

By any estimate, 2017 recorded India’s biggest online festive season sales by a fair margin. While research firm RedSeer Consulting put the growth at 50% over the 2016 sales numbers, Forrester Research’s estimates were a tad lower, but still at a healthy 40%. According to RedSeer, between 20 September and 20 October, 2017, the e-commerce majors were “on track” to clock record sales of $3.3 billion (Rs 20,000 crore). “This would be 50% higher than the 2016 festive month, which generated $2.2 billion in sales,” the marketing research firm noted. Forrester pegged the festive sales volume at $2.8-2.9 billion.


While some of the research firms declared Flipkart as the winner of festive sales battle, Amazon India chief Amit Agarwal refuted the findings. He believes that figures based on gross merchandise value are vanity metrics. Snapdeal, which substantially reduced its operations, claimed profitability during this season.

Paytm Mall to sue Unicommerce; GoJavas promoter Rai indicts Snapdeal founders

Paytm ECommerce Pvt. Ltd, which operates online marketplace Paytm Mall, will take legal action against Snapdeal-owned Unicommerce eSolutions Pvt. Ltd for data misuse, chief operating officer Amit Sinha said. Sinha’s comments come barely a fortnight after Unicommerce said that Paytm had withdrawn the case filed in April 2016 as it failed “to provide any proof” to support the allegations of data misuse.

In another instance of Snapdeal’s legal woes, Anand Rai, the promoter of QuickDel Logistics Pvt. Ltd that runs GoJavas, has filed a criminal case with the Economic Offences Wing against the e-tailer’s founders Kunal Bahl and Rohit Bansal for criminal breach of trust, cheating, intellectual-property theft, theft of trade secrets and criminal misappropriation of securities. The move comes barely two weeks after Rai shot off a Rs 300-crore legal notice to Snapdeal and its founders. VCCircle has a copy of the complaint that alleged that Bahl and Bansal had stolen confidential information, including employee data, service vendors and their service levels and that “Snapdeal illegally applied the same at their 100%-owned entity Vulcan”.

Snapdeal CTO, InMobi marketing chief quit

SoftBank-backed ad-tech firm InMobi has lost one more top executive—marketing chief Arun Pattabhiraman. Earlier this week, InMobi had appointed former Flipkart executive Ravi Krishnaswamy as its new chief technology officer. Co-founder Mohit Saxena had stepped down as the tech head to make way for Krishnaswamy.

Meanwhile, Snapdeal's CTO Rajiv Mangla put in his papers. He will leave the firm in December. Mangla's resignation comes a fortnight after CFO Anup Vikal quitting the firm.

Flipkart in talks with Swiggy, UrbanClap and UrbanLadder for buyouts: Report

A media report said that e-commerce major Flipkart was in talks to invest in local services firm UrbanClap, furniture e-tailer UrbanLadder, and food delivery startup Swiggy. Besides these three firms, Flipkart is also eyeing startups in insurance and wealth management, a report in Mint stated, citing three people aware of the development.

The development comes at a time when Flipkart is awash in funds, having gathered about $4 billion in its kitty. In April, it received $1.4 billion (Rs 9,000 crore) from Chinese Internet giant Tencent Holdings Ltd, US online retailer eBay and software giant Microsoft Corp in April and, and it also acquired eBay India. In August, Flipkart received a whopping $2.4 billion (Rs 15,300 crore) from Japan’s SoftBank Group Corp via its $93-billion Vision Fund.

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