With Rs 12-15 crore left in its kitty, Tiger Global-backed Shopclues is definitely having a tough time sustaining itself every passing day. In a last bid to survive, the company is learnt to be in talks with rival Snapdeal for an acquisition.
However, the deal is yet to take off.
This leaves the decision to the discretion of the buyer, in this case Snapdeal.
Also Read: Snapdeal, Shopclues eyeing same shopping cart
On the other hand, according to a person privy to the development, Snapdeal is reluctant to go ahead with the deal which is being anchored by Nexus Venture Partners - a common investor in both the companies.
Nexus declined to comment on the issue while Shopclues denied being in talks with Snapdeal for an acquisition and did not respond to a media query.
It was in January 2016 when Shopclues joined the much coveted unicorn club. The company had raised an undisclosed amount of funding in a round led by sovereign wealth fund GIC Pte Ltd along with existing investors Tiger Global and Nexus Venture Partners. The round was estimated to be $100-150 million in size and the money was expected to come in tranche.
Many saw GIC's entry as a precursor to an imminent initial public offering (IPO) of the company. And it wasn't far from truth.
By then, Shopclues had created a special name for itself. Unlike bigger rivals such as Flipkart and Amazon, it was mostly known for selling non-branded products. Most of its orders used to come from Tier 2-3 markets. Many called it an online flea market.
By mid-2017, Shopclues had hired Deepak Sharma as its chief financial officer as it was gearing up for an IPO.
This was around the same time when Flipkart was in talks to acquire Snapdeal. Even as Shopclues was trying to shortlist bankers, the Snapdeal- Flipkart deal collapsed. Snapdeal had decided that it wanted to go solo and not merge with rival Flipkart.
The investor ecosystem became a bit jittery after the Snapdeal-Flipkart deal collapsed as they were looking forward to consolidation in the sector.
The development left most of the investors in a wait and watch mode and Shopclues funding talks came to a grinding halt.
Shopclues was trying for a 2018 IPO. However, every banker it met during the shortlisting process, told them to defer it to 2019. The bankers were of the view that with the amount of scale the company had achieved in the last few years, it would be leaving too much money on the table if they did an IPO in 2018.
Shopclues decided to defer the IPO by a year. This was definitely a nail in the coffin because around the same time talks of a Walmart-Flipkart deal started emerging.
After delaying its IPO, the company decided to raise a bridge round. However by then the investors wanted to see how the e-commerce market shaped up post the Flipkart's acquisition.
Walmart announced the majority acquisition of Flipkart in March 2018 for $16 billion. By this time, according to a people privy to the development, investors had lot of interest in Shopclues. But they didn't want to commit an investment fearing it will go down the drain, given that Walmart had entered the fray.
In August 2018, an internal letter written to the employees by the co-founder and chief executive officer Sanjay Sethi got leaked. It said that Shopclues had managed to raise over $16 million additional fund for the year. While the email didn't mention the name of the investors, according to sources, this money had come from existing investors Nexus Venture Partners and Tiger Global.
Sethi had added that the company was targeting to break-even by November with a reduced burn rate of $0.5 million per month as against $5.5 million in January 2017. It also stated some ambitious plans of expanding to US, Nepal, Bangadesh and Sri Lanka.
Moneycontrol couldn't ascertain if the expansion happened as planned.
Meanwhile, Moneycontrol has learnt that the company is in a standoff with its employees, who want clarity related to their ESOPs if the deal goes through.
However, what is to be noted is that most of the ESOPs would have lost their value given the downfall in the valuation of the company in the last couple of years. Under such a scenario, with investors having preferential rights, the employees mostly end up with raw deals.
Shopclues has denied any issue regarding ESOPs.
However as of now, the company's daily orders have shrunk down from 60,000 during the good old days to around 30,000.
Shopclues reported its revenue from operations to be $42 million during the financial year ending March 2018, against $28 million during the previous financial year. The losses stood at $31 million in FY18.
In the fresh talks with Snapdeal, Shopclues has very limited strong points to tilt the deal in its favour.
While Shopclues claims to have 6,70,000 sellers on board, according to sources, barely 2,000-2,500 of them are live sellers currently. The company's 1/3rd of the sale is learnt to be coming from private label products. The average ticket size of the product sold ranges between 300-500 and the company is currently burning around Rs3-4 crore every month.
Currently it has less than 1,000 employees left in the company and only a select few have vested ESOPs. The company is in the middle of a standoff with its team who is trying to figure out what happens to their ESOPs.
Snapdeal on the other hand is in a much better position, financially having sold off most of its ancillary business units. Axis Bank bought Freecharge from Snapdeal in July 2017 giving Snapdeal a cash breather of Rs 385 crore. In 2018, Vulcan Express, the logistics arm of Snapdeal was acquired by Future Group again in an all-cash deal valued at $5.5 million.
In the last couple of years the company has cut costs and stayed away from heavy discounting of products on their platform. The strategy has worked with losses dropping by a sharp 88 percent to Rs 613 crore during the financial year 2018, compared to a loss of Rs 4,647 crore in the previous fiscal. The company is learnt to be shipping around 1.8-2 lakh orders on a daily basis.
Snapdeal announced that it turned cash flow positive in June 2018 and has since been investing its positive net margins in driving growth.