Mood at Snapdeal’s office a day after it terminated sale to Flipkart

Priyanka Sahay & Neha AlawadhiMoneycontrol News

Gurgaon’s ASF Tower wore a gloomy look on Tuesday. Employees were frequently walking in and out of the office of the country’s erstwhile third largest e-commerce office Snapdeal – some to leave for home early, others to have a stress buster smoke at the roadside kiosk.

Inside the office, employees could easily be seen in groups of three or four, having animated conversations. While some were helping others update their resume, others could be found in a panic stricken mode.

Quite a few senior executives were learnt to have asked their direct reportees not to bet any hope on the company management and instead start looking for employment options outside. Some employees are calling this their ‘personal Plan B.’

Snapdeal on Monday terminated talks for a sale to rival Flipkart stressing it would be pursuing an independent path in a strategy it calls as ‘Snapdeal 2.0’.

The 2.0 version of the company is expected to trigger another round of a mass exodus which could see Snapdeal become leaner by at least 600-800 employees.

Over the last couple of years, the company’s headcount has declined from around 9000 employees in 2014-15 to about 1100-odd people currently.

Mass layoffs need a board approval

According to two senior executives, the decision to layoff people en masse needs a board approval as the ‘severance’ needs to be decided.

“Some of the proposals are expected to be presented to the board soon. No decision has been taken as of now,” one of them said.

Employees are feeling anxious because of the uncertainty caused due to a pullout of the merger talks by founders and their decision to execute an alternative plan.

“It would be rather better if the decision (to layoff) was taken like immediately. At least we won’t be living under false hopes. Till now still many people are thinking that they might get to save their jobs,” said an employee requesting anonymity.

A group called Gurgaon chapter of IT Professionals Welfare Association has come in to aid the affected employees and is independently counseling them and helping them find jobs.

“All the employees we spoke to in Snapdeal are scared and distressed. Some said their seniors or team leads have been told verbally to do a headcount of all the members of their teams, and the general understanding is that 60 to 70 percent of each team will be asked to leave,” said Baljeet Poonia, convener of ITPWA.

The other thing the employees are worried about, according to Poonia, was that the job market is not as buoyant as it was a year ago. It would make it difficult for the laid off employees to find new job opportunities.

Labour union steps in to prevent mass layoffs

The association is trying to arrange a lawyer to defend the employees’ rights in front of the Labour Commission.

“The ITPWA demands that the retrenchment process be halted immediately at Snapdeal and the company enter into talks with employees' representatives on the way forward for the company and the employees and arrive at solutions that protect the livelihood and security of employees,” the association said in a statement.

During the layoffs that happened in February-March, this year, the employees were paid three months of their full salary as severance pay.

It wasn’t immediately clear if the same will happen now, especially when CEO Kunal Bahl in his letter to the employees a day before mentioned that there will be a need for tight control on the costs and that the company currently doesn't need to raise additional capital to reach profitability.

According to Bahl, the company is already profitable at gross profit level and targets Rs 150 crore in gross profit in the next 12 months.

It is also important to note that while Snapdeal sold its mobile payments unit Freecharge to Axis Bank last week, the deal is subject to approval by the Reserve Bank of India.

The amount of Rs 385 crore is expected to come in the bank for Snapdeal only after two months.

Another senior executive said that the matter is worse for people who have been asked to retain select employees.

“Not everyone is keen to stick around because of the looming uncertainty. Employees who are indispensable according to managers are asking why should they stay back? The bigger question is, what is the company willing to do to make them stay?” the senior executive said.

During the course of the week, a lot of meetings have been planned to proceed with Plan B, which will mostly be headed by the founders. Some of these meetings which were scheduled for today however got cancelled.

The plan is to retain 250-300 employees, which effectively means that the company will have to reduce its manpower by more than 70 percent, sources tell Moneycontrol.

"A list of 80 highest paid employees have been made. It mostly constitutes of non-CXOs at the level of vice president, president and assistant president," another senior executive said adding that it is yet to be decided that how many of them will be let go of.

"The salaries of these employees will range between Rs 75 lakh to Rs 1.5 crore," he added.

In a conversation with Moneycontrol, a person privy to the entire development however advocated that the layoffs were to happen 'even if the deal with Flipkart had happened.'

"For employees, it would have been worse in the Flipkart deal. It was very likely that almost 90 percent of the employees would have lost their jobs over the next 6 to 12 months," he said requesting anonymity.

It's imperative to point out that the employees had been promised retention bonuses if the deal with Flipkart went through. With Snapdeal 2.0 strategy there isn't an immediate clarity on the severance.

Adding to IT woes- a layoffs 2.0?

The layoffs could be seen in light of the recent news of layoffs in the Indian IT services sector, which has been asking employees to leave amid slowing growth, challenges in core geographies and an attempt to reduce bench strength.

There aren't many reliable numbers about the total number of employees employed by startups, but there are some indicative figures.

For instance, according to the Indian information technology body National Association of Software and services Companies (Nasscom), e-commerce is a USD 33 billion market, with online retail accounting for about 40 percent of the overall pie.

The Nasscom IT-BPM sector Strategic Review 2017 report noted that the sector employed 50,000-60,000 people, based on data recorded till the second quarter of 2016. It also considered startups incorporated 2011 onwards for the analysis. It is reasonable to assume that the actual number is much higher.

In contrast, the over USD 150 billion IT service industry as a whole employed 3.9 million people last year.

priyanka.sahay@nw18.com