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Snapdeal Saga- This is the first step towards Snapdeal’s merger with PayTM

February 23, 2017 Leave a comment

paytm-snapdeal

Snapdeal laying off 600 people and the two founders forgoing their salaries has been dominating the startup news headlines since Wednesday. Although a lot of people took the news as a surprise, but had one been following the incidents that led to yesterday’s email from the founders, this should have been expected.

Lets see what happened in last couple of months. 

Jason Kothari was brought in to clean the toxic elements created during the tenure of Rahul Yadav as the Founder-CEO of Housing. To his credit, Jason de-toxified Housing to make it attractive enough for PropTiger to bite in for an ‘all stock deal’- which means peanuts.

Within a couple of days of the Housing-PropTiger deal, Jason was announced as the Chief Strategy & Investment officer at Snapdeal.

‘Strategy’ and ‘Investment’. 

Snapdeal along with Flikart has been finding it tough to get the right valuation for raising the next round of funds that both of them want to raise. While Kalyan Krishnamurthy has been tasked with cleaning up Flipkart, Jason has been brought in to clean up Snapdeal of the toxins and make it attractive enough for investors. Most of the money losing initiatives have either been shut down or are in the process of being shut down. The founders, in their email also stressed on the renewed focus on ‘core’ business and strengths. The ‘core’ here being e-commerce.

SoftBank- The thread that binds Housing and Snapdeal. 

SoftBank was the biggest investor in Housing. It is also a very significant investor in Alibaba too. Alibaba has been flirting with the idea of buying into or buying out Snapdeal for long now. Alibaba also has been the biggest investor in PayTM. And, to make things complex, PayTM also has an e-commerce arm. Alibaba would never like to invest in two competing companies (it might have done so in 2014-15, but today the story is different). Sometime back, PayTM did spin off its e-commerce platform into separate business from its payments business (or vice-versa).

Opportunity for Alibaba, SoftBank, PayTM & Snapdeal.

The current situation presents a ripe opportunity for all the parties involved. Snapdeal has an opportunity to set its house in order, Alibaba has a wonderful opportunity to enter one of the biggest e-commerce markets in the world via PayTM investment and set up a head-on clash with Amazon for the long pending battle of ‘South-East-Asia’ between Amazon and Alibaba (Alibaba has already started digging in its heels in the SEA market with the Lazada investment).

Not an Insider News. Not even a rumour. My own views.

All the events discussed above are either factual and have led to where we are today or logical and plausible extension of the same into the future. I strongly feel the events in the future will go the way I have spelled out. If not, the involved parties might want to use this article as a food-for-thought for chalking out their strategy.

 

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