Founders of Struggling Snapdeal won’t Take Delivery of Salaries
Move part of company’s ongoing attempts to conserve cash and cut costs
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.