Kalaari Capital, the venture capital firm which is an early investor in Snapdeal, has reportedly agreed to the proposed sale of Snapdeal to the largest homegrown e-commerce company — Flipkart.
SoftBank Group, the largest investor in Snapdeal, has proposed the sale and is already in advanced talks with Flipkart for the same. However, SoftBank was facing resistance from early-stage investors — Kalaari Capital and Nexus Venture Partners.
The major reason behind opposition to the sale from Kalaari and Nexus is believed to be the valuation at which the sale is reportedly taking place. While the company was valued at $6.5 billion at its peak, the sale talks are going forward at around $1 billion valuation.
A person aware of the development has confirmed that Kalaari Capital has come on board for the sale and will work with SoftBank down the line. However, Nexus Venture Partners is not on board yet but talks are going on to convince the VC firm.
It is crucial for Japan-based SoftBank to get major investors on board for the sale because as per the shareholders agreement, the company requires at leat two major shareholders to push the sale. While we now know that SoftBank and Kalaari are game for the sale, it is not yet known if Snapdeal founders — Kunal Bahl and Rohit Bansal have agreed for the sale or not.
If the sale goes through, SoftBank will be able to find its way into India’s largest e-commerce platform. The deal is said to be a two-step agreement. Once the sale goes through, SoftBank will make investment in Flipkart in the range of $1 billion to $1.5 billion for a significant stake in the company. It will also buy out a portion of Tiger Global Management’s stake in Flipkart.
However, Snapdeal is the only company of Jasper Infotech that is likely to get sold. Jasper’s online payments firm — FreeCharge, which it acquired a few years ago, is also up for sale. And for this one too, Flipkart is leading the race.
But unlike with Snapdeal, Flipkart isn’t the only company interested to gobble up FreeCharge for around $45 million to $75 million. Alibaba-backed Paytm and Mobikiwk are also in the race. Earlier, PayPal and PayU were reported to have been discussing the FreeCharge acquisition, but nothing has been materialized yet.
If the sale goes through for any of these two companies — Snapdeal and FreeCharge, for the proposed prices, it would be steep fall in the company’s valuation. As per the proposed sale terms, Snapdeal’s valuation falls from $6.5 billion to just under $1 billion. The deal is also said to be an equity swap deal, with a ratio of 1:10.
On the other hand, FreeCharge getting acquired for around $45-75 million is nothing compared to the current market conditions, which are favoring fin-tech startups, and especially payment providers. Snapdeal acquired FreeCharge for around $400-450 million and has invested close to Rs 420 crore in the company this year.