Flipkart, Snapdeal to duel over US$100mil valuation gap

BANGALORE: After Snapdeal’s board rejected a takeover offer from Flipkart Online Services Pvt Ltd, the two sides find themselves about US$100mil apart as negotiations continue, people familiar with the matter said.

Flipkart, India’s largest e-commerce operator, is unlikely to raise its offer above US$900mil while Snapdeal is seeking a price of US$1bil, the people said, asking not to be identified talking about a private deal. Talks could drag on for weeks after Snapdeal rejected an offer of US$850mil as too low, the people said.

Efforts by India’s two major e-commerce operators to hash out a merger have stalled on a valuation that has already come down from US$6.5bil. Snapdeal backer SoftBank Group Corp is pushing for a combination while some investors and the two founders hold out for a better price.

As the local players try to reach a resolution, global giant Amazon. com Inc is expanding steadily in the country with chief executive officer Jeff Bezos pledging to invest US$5bil.

Smaller investors in Snapdeal who don’t have a board seat are unhappy over what they say are special payments proposed for two of the early venture capital backers, Kalaari Capital and Nexus Venture Partners, as well as founders of the start-up Kunal Bahl and Rohit Bansal. They wanted parity for all investors, big and small, people familiar with the talks said last month. Flipkart has required that all investors in its Delhi-based rival agreed to a deal.

Representatives for Flipkart, Snapdeal and SoftBank declined to comment. Snapdeal is being advised by Credit Suisse Group AG, the people said.

India is shaping up as a critical market for Amazon which was vanquished in neighbouring China by domestic players and it is doing everything to ensure that it does not meet the same fate again.

For Flipkart, a Snapdeal merger opens up an avenue to garner further investments from SoftBank, whose Vision Fund has immense finances at its disposal. For SoftBank which has already invested about US$5bil in India, the merger is crucial to establish itself as a prime investor in its e-commerce segment.

SoftBank recently invested US$1.4bil in India’s largest digital payments start-up, Paytm, and also has existing investments in Ola which fiercely competes against Uber Technologies Inc in the cab aggregation segment.