NEW DELHI: Founders Kunal Bahl and Rohit Bansal will relinquish control of online marketplace Snapdeal to market leader Flipkart as early investors in the Delhi-based company give their consent to the sale, according to four people aware of the deal.
The transaction, if successful, will redefine India’s online retail industry, and sharpen the battle lines between the home-grown contender and global rivals — America’s Amazon and China’s Alibaba
“Both founders will not be part of the merged entity in any capacity, post the acquisition of the company by Flipkart,” the people cited above told ET, thereby acceding to a major demand made by India’s largest ecommerce company, as a condition for the acquisition to be finalised.
A non-binding term sheet is expected to be signed over the next 48-72 hours, after which Flipkart will begin the financial and commercial due diligence of Snapdeal.
The complete acquisition is expected to take two-three months. Emails sent to Snapdeal, Flipkart and Nexus Venture Partners did not elicit any responses at the time of going to press.
Separately, the Tokyo-headquartered conglomerate is poised to lead an investment of an estimated $1.9 billion in digital wallets provider Paytm. SoftBank, which had invested about $900 million in Snapdeal, is in advanced stages of discussions to back, both, Flipkart and Paytm.
Nexus, which has till date invested $43-45 million in Snapdeal for about an 11% stake, is expected to receive about $60 million in lieu of its holding. It is yet unclear whether this amount will be entirely in cash or will have a stock component as well,
As per the company’s shareholders agreement, SoftBank required the consent of at least two major Jasper Infotech shareholders to push through sale of the company.
For the founders, however, the payout will be a steep fall in fortunes, given that their stake in the company, estimated at about 6.5%, could have potentially seen them earn as much as $65 million with the company being valued at $1billion.
However, sources claimed that SoftBank, the largest stakeholder in Snapdeal, and which has been leading the efforts to sell the company, had categorically declined to agree to a larger amount, and has squarely laid the blame for the weak performance of the company on the founders’ shoulders, citing poor execution.
Bahl and Bansal had earned close to Rs 80 crore each when they sold a part of their stake to Canadian pension fund Ontario Teachers’ Pension Plan in 2015, in a secondary sale, at a time the company was valued at $6.5 billion.
While the closure of the deal is still weeks away, getting board approval will be seen as a major victory for SoftBank, which has been looking to restructure its portfolio in the country.
On Wednesday, at the time of reporting its annual results for the financial year ending March 2017, the technology-telecom giant had stated that it has incurred a loss of over Rs 9,000 crore (160.42 billion yen or $1.41 billion) on its investments in the country’s Internet commerce sector.