Snapdeal IPO - 7 Things to Know

Snapdeal Ltd, has had an interesting history in the last few years. Once touted as a competitor to such formidable names like Flipkart and Amazon, Snapdeal lost its way in between and almost came to the point of selling out to Flipkart by 2017. However, it has since refocussed its business model and focused on very niche products with positive results.

7 Interesting Facts to Know About Snapdeal IPO
 

1) Snapdeal Ltd has filed for its proposed IPO with SEBI which comprises of a fresh issue of Rs.1,250 crore and an offer for sale of OFS of 30.77 million shares by the promoters and early investors of the company.

The company had filed its draft red herring prospectus in December 2021 and the final approval from SEBI is awaited, which is expected to come in around February or March 2022. The final dates of the issue will be finalized only after that.

2) Out of the fresh issue of Rs.1,250 crore, the company will be looking at organic and inorganic expansion of its business as well as reduction of debt. One of the major challenges for the ecommerce players is to focus on cutting down on the monthly cash burn and one of the easiest ways of achieving this is by cutting down on ad spends and on debt. The Snapdeal IPO proceeds will be used to repay and also to prepay some of its debt.

3) Snapdeal Ltd is backed by some very formidable names like Blackrock (the largest fund manager in the world with AUM over $10 trillion), Temasek Holdings and eBay Inc. Ratan Tata has also invested in Snapdeal in his personal capacity.

Softbank, owned by Masayoshi Son, is also an early investor in Snapdeal Ltd and most of these early investors are expected to be participating in the OFS.

4) Snapdeal Ltd was promoted in 2010 by Kunal Bahl and Rohit Bansal. It started off as a deals or bargains website before transforming into a full-fledged portal. Along the way, the company faltered as it could not match up to the deep pockets of Amazon and Flipkart due to their backing by Wal-Mart.

This had almost forced Snapdeal into a transaction to sell out to Flipkart, with the deal being syndicated by Softbank.

5) In 2017, Snapdeal Ltd decided to walk out of the Flipkart deal and chart a new course for the company. It focused on the non-affluent and non-English speaking semi-urban and rural audiences. The ticket sizes were much smaller in this new model but it was more sustainable, more niche focussed and also ensured better ROI over the longer run.

For instance, Snapdeal sells products like table mats, tummy trimmers and beard grooming oils, all under $5 per unit. Snapdeal currently offers over 6 crore items on its agnostic portal with more than 90% of its products having a per unit value of under Rs.1,000.

6) The proof of the pudding lies in the eating. The strategy appears to have paid off as in the recent festive sales, Snapdeal saw sales volumes grow by 254% on a YoY basis in the fashion category and a growth of 101% in the kitchen appliances and products category.

The beauty category also witnessed 93% YoY growth during the festive sales indicating that the new strategy was clearly paying off.

7) The IPO of Snapdeal Ltd will be lead managed by Axis Capital, BOFA Securities, CLSA India and JM Financial. They will act as the book running lead managers or BRLMs to the issue.

However, the timing of the actual IPO could still predicate on how the market response to the digital IPO pans out, especially after the sharp price damage in the last 2 months post the Paytm listing.

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