Snapdeal board to meet today, to convince Nexus Venture on stake sale

An employee is seen at the front desk of Snapdeal headquarters in Gurugram on the outskirts of New Delhi, India, April 3, 2017. REUTERS/Adnan Abidi

Priyanka Sahay
Moneycontrol News

At a luxury hotel in Gurgaon today, seven board members of Snapdeal will meet to discuss the final contours of the sale of the e-commerce firm to Bangalore-based rival Flipkart, sources privy to the discussion told Moneycontrol. The deal which has been in works for last few weeks is stuck due disagreement within stakeholders over final settlement for the company's earliest investors.

According to a person privy to the development, the board will focus on bringing Nexus Venture Partners one of the early investors in Snapdeal to agree to the deal to sell the company. The meeting is also likely to bring clarity to the fate of over 1,000 existing employees of Snapdeal.

"Issues such as employees retention and severance packages have broadly been sorted by now," another source close to Snapdeal told Moneycontrol.

##Select CXOs to get large severance packages

According to the second source quoted above, the deal is likely to include a settlement amount for only a select top executives, mostly CXOs.

Other senior employees including senior vice presidents and category heads could get salaries ranging between 6-10 months titled as 'retention bonus' to join the merged entity with a specified lock in period.

For the bottom rung of employees, there has been a discussion to give them around six months of employment assurance.

Snapdeal did not respond to an email query by Moneycontrol on the issues.

The meeting today is likely to take place in Gurgaon and will be conducted in the first half of the day.

While Softbank representatives are expected to attend the meeting through a video conferencing, Nexus and Kalaari will be present in Gurgaon.

Cofounders Rohit Bansal, Kunal Bahl, Softbank's Lydia Jett, Kabir Misra and Kalaari Capital's Vani Kola are expected to join the meeting. Nexus Venture Partners' Suvir Sujan is also likely to be present. The meeting was pre-scheduled weeks ago, even as the final contours were getting shaped.

##Sellers asked to take back goods

Even as the merger talks are in progress, Snapdeal has asked sellers to take back slow moving inventory from its warehouses. According to one of the sources quoted above the gross merchandise value of the inventory that Snapdeal stores in its warehouses for the sellers amounts to about Rs 300-330 crore. Of this, at least 20-25 percent constitutes slow moving inventory.

Similar to other e-commerce firms, Snapdeal stores inventory in warehouses since that allows it to manage faster delivery of the product to the consumers.

According to people privy to the development, this (settlement) is being done since the last couple of weeks. However according to one of the persons quoted above, it had nothing to do with the deal and was a practice done with every change of cycle.

"The inventory in Snapdeal is owned by the seller and not the e-commerce company. They can take it at any point in time. The company too keeps clearing it, if the products are clogging the block," he said. 

##Kalaari Capital may get a full exit

According to an industry analyst, the deal is likely to witness a full exit to Snapdeal's earliest investor Kalaari Capital.

"Kalaari has partially exited the company anyway in previous rounds. The bigger question is whether Flipkart want to bring them on board or not?" the source remarked.

Snapdeal which was started in 2010 by schoolmates Kunal Bahl and Rohit Bansal.

Things started to turn sour when an expected large funding from Softbank did not come, late last year.

Succumbing to the lack of funding, the Snapdeal is now in conversation with its biggest rival for a sale.

There have been multiple reports on differences among the investors as well as the founders of the company, which has now stalled the deal.

In an email addressed to its employees last week, Bahl has said that it was the investors who were driving the decision on the way forward, indicating that the founders had little control over immediate developments at the company.

The company is currently considering multiple options. Besides having conversations to sell Snapdeal, the company is also in independent talks to sell Snapdeal's logistics arm Vulcan Express with TVS Logistics and Future Supply Chain Solutions. For the payments arm Freecharge, Snapdeal is looking for potential buyers.

Today's board meeting will clear a lot of air on the company's various subsidiaries as well.

priyanka.sahay@nw18.com