InvestorQ : Can you tell me about the proposed IPO of Snapdeal and when it is hitting the IPO market?
Crowny Pinto made post

Can you tell me about the proposed IPO of Snapdeal and when it is hitting the IPO market?

5 months ago

Snapdeal, which was founded in 2010 by Kunal Bahl and Rohit Bansal, has filed the draft red herring prospectus with SEBI for proposed IPO. It plans to issue a combination of a fresh shares and an offer for sale. The fresh issue portion will consist of new shares worth Rs.1,250 crore. In addition, Snapdeal will do an offer for sale (OFS) of 30.77 million shares to the public, with many of the early investors offering their shares in the IPO.

Snapdeal has a solid ownership roster. It has the backing of Softbank as well as other marquee investors like Blackrock, Temasek, Sequoia and eBay. Many of these early backers plan to take a partial exit from Snapdeal via the offer for sale portion. The fresh funds will be used to bankroll its expansion and growth plans and will also give a listing currency to the stock, allowing them more leeway in inorganic growth plans for the future.

At one point, Snapdeal was seen as a direct competition to Amazon and Flipkart in the online ecommerce market place. However, that Snapdeal lacked was the deep pocket backing of big global names. Amazon had the backing of its American parent while Flipkart was backed by the venerable Wal-Mart. As Snapdeal could not purchase sales growth with fund infusions, it eventually lost out in the race to Flipkart and Amazon.

The company underwent a strategy shift in 2017 when they decided against a merger deal with Flipkart. Instead, they decided to focus on containing cash burn and pushing sales of affordable and mass value products. It decided to specifically cater to the non-metro and non-English speaking population in smaller towns; contrast to the metro focus of Amazon and Flipkart. This gave Snapdeal a unique niche.

Circa 2021. Snapdeal offers 6 crore items on its online catalogue with 90% of products priced under Rs.1,000. Its products range from table mats to tummy trimmers to beard grooming oils on its platform. In the recent November festive season, Snapdeal saw 250% growth in sales in fashion category and over 100% growth in kitchen appliances and beauty categories. Clearly ,the new focus appears to be paying off as losses are reducing.