Founders of Strug­gling Snapdeal won’t Take De­liv­ery of Salaries

Move part of com­pany’s on­go­ing at­tempts to con­serve cash and cut costs

The Economic Times - - Front Page - Biswarup.Gooptu @times­

New Delhi: Kunal Bahl and Ro­hit Bansal — co­founders of on­line mar­ket­place Snapdeal — an­nounced they will forego their salaries, with im­me­di­ate ef­fect, be­com­ing the first among In­dia’s high-pro­file startup en­trepreneurs to do so, in a move aimed at con­serv­ing cash and cut­ting costs to turn around the for­tunes of their seven-year-old firm. In an email to em­ploy­ees on Wed­nes­day, Bahl and Bansal, both 33, pledged to take a 100% salary cut while stat­ing that sev­eral of their col­leagues had also agreed to a re­duc­tion in com­pen­sa­tion.

For the fi­nan­cial year end­ing March 31, 2015, the founders re­ceived com­pen­sa­tion of .₹ 52.94 crore each, which in­clude salaries of .₹ 1.5 crore and pay­ment against founder stock op­tions of .₹ 51.43 crore, ac­cord­ing to fil­ings with the Reg­is­trar of Com­pa­nies and data col­lated by Tofler, a lead­ing cor­po­rate re­search and mon­i­tor­ing plat­form.

For the fis­cal year ended March 31, 2014, the founders earned .₹ 1 crore each. Founder salary records for fis­cal 2016 are yet to be dis­closed. Snapdeal is backed by Ja­pan’s SoftBank, Tai­wanese con­glom­er­ate Fox­conn and China’s Alibaba Group.

“We be­lieve that ev­ery re­source of the com­pany should be de­ployed for driv­ing us to­wards prof­itable growth and with this an­nounce­ment, both Ro­hit and I are tak­ing a 100% salary cut. Many of our lead­ers have also stepped up proac­tively and of­fered to take a sig­nif­i­cant cut in com­pen­sa­tion,” said the email, which was signed by both Bahl and Bansal.

Though not un­com­mon in Sil­i­con Val­ley, the move is un­prece­dented in In­dia’s startup ecosys­tem

ET has re­viewed a copy of the email.

The de­ci­sion to not take salaries, while not an un­com­mon one in the Sil­i­con Val­ley (both Larry Page and Sergey Brin, the chief ex­ec­u­tive and pres­i­dent of Al­pha­bet, re­spec­tively, have taken $1 as com­pen­sa­tion for years), is some­what un­prece­dented in In­dia’s startup ecosys­tem. “This will mean tough choices and a con­scious de­par­ture from a me-too race to the edge of the cliff. Let’s re­mem­ber — GMV (gross mer­chan­dise value, an in­dus­try term for the to­tal value of mer­chan­dise sold on an ecom­merce site) is van­ity, Profit is san­ity,” the founders wrote.

Snapdeal co­founders’ pledge comes at a time when the com­pany con­firmed that it was un­der­tak­ing lay­offs and shut­ting non-core projects, as it looks to ef­fect a turn­around. Af­fected em­ploy­ees are be­ing of­fered three months’ salary as part of the sev­er­ance pack­age. The com­pany has been strug­gling to raise funds for its dig­i­tal pay­ments plat­form FreeCharge, while also see­ing dip­ping sales across the ecom­merce plat­form. The com­pany’s con­sol­i­dated cash and cur­rent in­vest­ments for fis­cal 2015-16 stood at 3,278 crore. “We are com­bin­ing teams, re­duc­ing lay­ers, elim­i­nat­ing non­core projects and strength­en­ing the fo­cus on prof­itable growth. Sadly, we will also be say­ing re­ally painful good­byes to some of our col­leagues in this process. This is by far the hard­est de­ci­sion that we have ever taken in our lives,” the email stated.

ET re­ported ear­lier in the month that the com­pany was in the process of sig­nif­i­cantly trim­ming its work­force, a move that could af­fect about 1,000 em­ploy­ees.

While the com­pany did not ex­plic­itly deny the lay­offs at the time, its spokesper­sons had con­tested the num­ber of em­ploy­ees that could be af­fected. It has also said that Vul­can Ex­press, its lo­gis­tics unit, which too is be­lieved to see a re­duc­tion in work­force, will turn prof­itable by the mid­dle of this year.

Snapdeal’s em­ployee-re­lated ex­penses rose to 911 crore in FY16, up 148% from the pre­vi­ous fis­cal. Em­ployee ex­penses con­sti­tute the largest cost for the com­pany, af­ter mar­ket­ing and ad­ver­tis­ing. But un­like the lat­ter, which is a vari­able cost, wages is a fixed cost.

For the fi­nan­cial year 201516, the com­pany’s to­tal sales grew 56% to .₹ 1,457 crore, but losses more than dou­bled to .₹ 2,960 crore.

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