Capital crunch: Snapdeal’s Kunal Bahl, Rohit Bansal to take 100% salary cut
Snapdeal co-founder Kunal Bahl on Wednesday accepted that the startup had made errors in execution, at a time when the e-tailer is in dire need of funds.
In an email to employees, a copy of which was seen by Mint, Bahl said on Wednesday that co-founder Rohit Bansal and he will take a “100% salary cut”.
Last year, Bahl and Bansal drew total compensation of about ₹40 crore each (including stock sales).
Bahl added in the email that Snapdeal (Jasper Infotech Pvt Ltd) had started to expand its business much before “the right economic model and market fit was figured out”.
Bahl wrote to Snapdeal employees after the company said that it will cut jobs without specifying a number. Apart from the job cuts, Snapdeal has also seen the departure of senior executives, including Govind Rajan, chief executive of its payments unit Freecharge, and Tony Navin, head of partnerships and strategic investments.
“Has our company and industry been going through a troubled time? Absolutely. Did we make errors in our execution? No doubt about that. Over the last 2-3 years, with all the capital coming into this market, our entire industry started making mistakes,” Bahl said in the email.
In August 2016, Flipkart co-founder Sachin Bansal made a similar admission to company employees, indicating that he had lost his job as CEO because of performance issues. As with Snapdeal’s Bahl, he was trying to placate his employees, following Flipkart’s announcement a few weeks earlier that it had cut some 600 jobs. Bansal was replaced as CEO by co-founder Binny Bansal in January 2016; a year later, Binny Bansal himself was replaced as CEO by Kalyan Krishnamurthy— a representative of Tiger Global Management, Flipkart’s largest investor.
“We also started diversifying and starting new projects while we still hadn’t perfected the first or made it profitable. We started building our team and capabilities for a much larger size of business than what was required with the present scale,” he wrote in the email. “Ambition is critical, because that’s what motivates us to give our very best every single day —to achieve the undoable. However, a large amount of capital with ambition can be a potent mix that drives a company to defocus from its core. We feel that happened to us. We started doing too many things, and all of us starting with myself and Rohit, are to blame for it,” he said.
As cash dries up and fresh funds seem elusive, Snapdeal is conserving cash by cutting the workforce and salaries, and shutting some business verticals.
Mint reported on February 17 that Jasper Infotech Pvt Ltd, which runs Snapdeal, had ₹1,100-1,200 crore cash left in the bank and ₹300-400 crore at its payments unit Freecharge at the end of 2016. Talks for a bridge round of funding with existing investor SoftBank Group were deferred because of differences over valuation, Mint had reported.
On Wednesday, the company said that its logistics unit, Vulcan Express, is expected to turn profitable by the middle of the year. Vulcan counts Snapdeal and Myntra as its only two clients.
“On our journey towards becoming India’s first profitable e-commerce firm in two years, it is important that we continue to drive efficiency across all parts of our business, which enables us to pass on the value to consumers and sellers. We have realigned our resources and teams to further these goals and drive highquality business growth,” said a Snapdeal spokesperson.