The Indian e-commerce nexus: Flipkart-Snapdeal merger on the cards

The deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian e-commerce space

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Japan’s SoftBank, and the largest shareholder in Indian e-commerce platform, Snapdeal, has secured a nod from co-investor Nexus Venture Partners (NVP) to sell the e-commerce firm to its rival Flipkart, according to PTI report.

The bank had secured a go-ahead from the founders and another investor Kalaari last month.

As per regulatory filings, SoftBank currently owns over 30% in Snapdeal, while Nexus has roughly a 10% stake and Kalaari holds 8% share in the firm.

SoftBank yesterday said it suffered a loss of $1 billion on its investment in Snapdeal during 2016-17.

The deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian e-commerce space. PTI quoted different sources as saying that Snapdeal founders would get about $25 million each, while NVP could get close to $100 million and stake in the merged/new entity. Kalaari could get about $70-80 million.

Snapdeal was valued at $6.5 billion in its last funding round in February 2016. The valuation, however, has shrunk since then and the potential deal could see Snapdeal being valued at about $1 billion, said market watchers.

In another important development, reports of Paytm signing a non-exclusive term sheet to acquire Snapdeal-owned rival Freecharge, emerged today.

Indian e-commerce companies have seen funding dry up over the last few months as investors are focusing extensively on profitability and rationalization of expenses.

Read More: What’s ailing Flipkart and Snapdeal the flag-bearers of e-commerce in India

The current Indian e-commerce industry size is estimated to be around $14.5 billion, and is expected to touch the $100 billion mark by 2020.

Both Snapdeal and Flipkart have been reporting losses and the former has continuously been struggling to raise funds. Snapdeal posted a loss of INR 29.6 billion (2015-16); Flipkart revealed losses of INR 52.23 billion. Even Amazon reported a loss of INR 35.71 billion. Combined the loss reaches a mammoth figure of INR 117.54 billion.

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Paytm to acquire rival Freecharge; is free to sell to others: Report