Snapdeal Files DRHP for IPO

Snapdeal plans to file the DRHP for its proposed IPO before the end of December and come out with its IPO before the end of the current fiscal year.

The IPO will comprise of a fresh issue of shares worth Rs.2,000 crore while the promoters and some of the early investors also plan to offer shares as part of the offer for sale. The fresh issue of Rs.2,000 crore plus the OFS will comprise the overall IPO.

The IPO will be significant for Snapdeal in more ways than one. Snapdeal is backed by Softbank of Japan and was once seen as a tough competitor to Amazon and Flipkart. However, Snapdeal faltered along the way and was on the verge of selling out to Flipkart, which eventually did not happen. This is like a second coming for Flipkart.

Softbank is likely to be one of the participants in the OFS. It currently owns 35.67% in Snapdeal and will have to bring down its holdings in Snapdeal to below 25%. Softbank may, therefore, have to offer shares to that extent. However, other early backers of Snapdeal like Temasek of Singapore, Blackrock and eBay will not be participating in the OFS.

In terms of ownership mix, Softbank owns 35.67% in Snapdeal while the founders (Kunal Bahl and Rohit Bansal) hold jointly own 19% in the company. In addition, the company is also backed by other marquee investors like Temasek, eBay, Blackrock, Alibaba, Intel Capital as  well as the family offices of Ratan Tata and Azim Premji.

The timing of the IPO may be just about right as Snapdeal looks to boost its online retail franchise. Digital players have already raised close to Rs.40,000 crore via IPOs this year, of which nearly 50% was done by Paytm. After the initial success of technology driven names like Zomato and Nykaa, Snapdeal finds this the right time to expand its footprint.

While the DRHP is yet to be filed, market estimates are that Snapdeal could look at valuations in the vicinity of $1.50 billion for the company overall. However, the recent Paytm response and the subsequent listing performance may be an overhang on the Snapdeal IPO and a lot will depend on how markets view the valuation metrics.

Snapdeal was founded in 2010 and till 2017 it was giving a tight run to Flipkart and Amazon. In 2017, Snapdeal came close to merging with Flipkart before Bahl opted out of the deal with funding support from Softbank. Subsequently, Flipkart was taken over by Wal-Mart.

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