Snapdeal is conducting due diligence on ShopClues, a move that may lead to a potential acquisition of the latter, which may bring in a fresh infusion of funds for the new entity.
Hoping to make a minor comeback in the e-commerce space, dominated by Flipkart and Amazon, Gurugram-based Snapdeal is reportedly trying to go for a fresh funding round.
The Kunal Bahl-led firm is in talks to buy smaller rival ShopClues to show investors it has the potential to grow and expand.
This is not the first time Bahl has tried to pull a rabbit out of a hat.
The company hopes that its claims of being profitable in the tier-III and tier-IV markets and beyond will help it get big bucks.
According to reports, Snapdeal is conducting due diligence on ShopClues, a move that may lead to a potential acquisition of the latter, which may bring in a fresh infusion of funds for the new entity, sources said.
However, discussions are at an early stage and people in the know said it might be too soon to say that the deal would materialise.
PricewaterhouseCoopers (PWC) is involved the process and if the deal goes through, it would be an all-stock transaction, sources said.
The Softbank-backed Snapdeal has been focusing on the unbranded goods in tier-II and tier-III cities.
Co-founders Kunal Bahl and Rohit Bansal put in place a plan called Snapdeal 2.0 in 2017 year when talks for a sale to Flipkart fell flat.
The order volume for Snapdeal has risen from 35,000 daily orders in August 2017 to over 200,000 new orders a day.
According to reports, the deal is expected to value ShopClues from $200 million to $250 million.
ShopClues had an estimated value of $1.1 billion in 2017.
Both the companies share Nexus Venture Partners as a common investor.
“If this goes through, it will be a win-win situation for ShopClues as they do not have any suitor at the moment,” said a person familiar with the ongoing discussions.
Reports of Snapdeal buying out ShopClues, anchored by common investor Nexus, have been doing the rounds for about a year now.
ShopClues was also reported to have limited fund reserves.
“While we don’t generally respond to industry rumors, given the significance of these speculations, we would like to say that ‘Bharat consumer’ or the lower income consumer in tier-II and –III cities has been our core customers since inception.
"And, given that more than 400 million of these consumers will be coming online in the next few years,” said a spokeswoman at ShopClues.
It becomes a very lucrative consumer segment for most e-commerce companies.
There has always been interest in us and these speculations are no exception. In fiscal year 2018, ShopClues’ losses were Rs 210 crore, which in FY19 fell to less than Rs 45 crore, keeping revenues flat, it said.
Snapdeal declined comment on the reports.
“These are early stage discussions and outcomes depend on the due diligence. A ‘no’ may come sooner but ‘yes’ may take longer,” said a person familiar with the matter.
Photograph: Adnan Abidi/Reuters