Alibaba-backed Paytm close to buying rival FreeCharge from Snapdeal

Tammy Harvey
May 13, 2017

Valued at United States dollars 6.5 billion in February 2016, Snapdeal has seen the valuation shrink since then and industry watchers said the potential sale to Flipkart could be done at about USD 1 billion.

Japanese telecom and internet giant SoftBank has written off almost $1 billion in the value of Snapdeal (its best asset in India till recently), as it pushes to offload the Kunal Bahl-led company onto larger rival Flipkart. NVP is another crucial investor in Snapdeal and Yes should be likely expected for the biggest e-commerce merger in the country. The Japanese giant is the largest investor in Snapdeal.

Japanese investor SoftBank has won co-investor Nexus Venture Partners' (NVP) approval for going ahead with a distress sale-cum-merger of cash-strapped Snapdeal with bigger e-commerce rival Flipkart, according to reliable sources. But things may change now, said analysts.

Just a day back SoftBank announced in its annual results report that it had written off over Rs 6,400 crore ($1 billion) on the valuation of its investment in Snapdeal.

"Highly competitive e-commerce market in India has made a trend of the company's business performance lower than initially anticipated", SoftBank said in its earnings statement.

SoftBank is the largest investor in cab-hailing app Ola and e-commerce marketplace Snapdeal. With intense competition from deep-pocketed global rivals like Amazon, companies like Flipkart and Snapdeal could face more heat in the coming days.

It is believed that the sale of Snapdeal will involve a share swap in the ratio of 1:10 in favour of Flipkart.

While the company was able to grow its revenues from ₹76 crore in 2011 to ₹1,457 crore in 2016, its losses widened to ₹2,960 crore in March 2016.

As per the agreement, Snapdeal founders are expected to get $15million each from the deal where as Nexus Venture partners would get around $50 million to $60million.

As far asPaytm is concerned, reports suggest that in April SoftBank agreed to invest over $1.4 billion in Paytm.

"SBG recorded loss from financial instruments of 160,419 million Japanese Yen ($1.4 billion) in its consolidated financial statements for the fiscal year ended March 2017. Financial instruments at FVTPL included preferred shares of Jasper Infotech and ANI Technologies".

Valued at $6 billion mid of previous year, the company has been going through very challenging times since the last 8-10 months as it could not raise funds.

Other reports by Ligue1talk

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