Snapdeal seeks Sebi nod for Rs 1,250 crore IPO

Bengaluru: Online marketplace Snapdeal has filed its draft red herring prospectus (DRHP) with the country’s markets regulator Sebi (Securities and Exchange Board of India) to raise Rs 1,250 crore through issuance of new shares.
The IPO will also see an offer for sale (OFS) component of 30,769,600 shares where Snapdeal’s existing investors like SoftBank, Foxconn, Sequoia Capital and The Ontario Teachers’ Pension Plan Board are expected to sell parts of their holding in the company.

Snapdeal said it plans to use Rs 900 crore from IPO proceeds to fund its organic growth initiatives.

ET reported in its December 21 edition saying SoftBank is
likely to dilute its stake to below 25% in Snapdeal as the etailer wants to list as a professionally managed company. SoftBank owns more than 35% in Snapdeal with significant influence over the firm, as per the DRHP.
Snapdeal, once a challenger to Flipkart and Amazon India, clocked a total income of little over Rs 510 crore in fiscal year 2021 compared to Rs 916 crore in fiscal year 2020–down by 44%. Its losses for the same period were at Rs 125 crore compared to Rs 274 crore a year ago– down by 54%.

The online marketplace reported a total income of Rs 252 crore in the first six months of the current financial year with a loss of over Rs 175 crore, the DRHP showed.

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Snapdeal founders Kunal Bahl and Rohit Bansal are not selling any shares in the company’s upcoming IPO. Together, they own over 20% of the company.

For Snapdeal, a successful IPO would mark a major turnaround after losing out to Amazon India and Walmart-owned Flipkart in the race to be India’s top ecommerce player.

The company over the last three-four years has largely focussed on selling unbranded products and reducing its monthly cash burn. In 2017, it walked away from a potential merger with bigger rival Flipkart, which is now majority-owned by Walmart.

Snapdeal has been focusing on segments like fashion, home & kitchen, electronic accessories with the strategy to sell quality products at affordable prices.

According to the DRHP, Snapdeal saw a net merchandise value (NMV) of Rs 374 crore in the second quarter of FY22 compared to Rs 290 crore in the first quarter of FY22 and Rs 205 crore in the final quarter of FY21. It delivered 8.59 million units during the second quarter of fiscal year 2022.

NMV is defined as the total list price of merchandise sold (inclusive of discount from sellers) that was delivered to the customers and not returned or cancelled by them.

“They (value-conscious buyers) prefer to not pay for brand premiums, but for what matters to them – good fit with their functional needs, trendy looks and styling, quality that lasts. A product that meets all these needs and is priced right is value,” Bahl said in a recent post on LinkedIn.

Bahl said in his post that “Snapdeal clocks around 80% of its total sales from 1,000 suppliers, but with no single seller accounting for more than 2% of its total sales.” “75% of our business comes from repeat customers. More than 70% of our sales are from beyond tier II towns and cities and 99% of our orders come via mobile phones,” he added.

Snapdeal has also created what it calls ‘Power Brands’ by working closely with suppliers. These are essentially based on product searches on Snapdeal which consumers are looking for but do not find easily on the platform. Currently, the etailer owns over a dozen such Power Brands which constitute around 10% of its total sales.

“With more than 70% of our users from outside tier II towns buying affordable goods from us, delivering efficiently and economically across the span and depth of Bharat requires thoughtful and innovative ecommerce logistics solutions,” Bahl’s LinkedIn post added, explaining its logistics platform UniMove. It allocates third-party logistics players to specific legs of the delivery journey and essentially gives better visibility to the company in allocation and utilisation of resources for logistics.

ET reported that Snapdeal is also setting up offline stores to have an omni-channel presence, a growing trend among internet-first businesses in India.

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