Snapdeal has cash reserves to last just 10-12 months

Sangeetha Chengappa Bengaluru | Updated on January 15, 2018


Seeks fresh funds; takeover speculation grows

The country’s third-largest e-commerce firm, Snapdeal, is left with limited cash reserves that could see it through for the next 10-12 months at most, as it continues to struggle to raise a fresh round of funds from new and existing investors.

FreeCharge on the block

After that, the e-tailer is most likely to merge with the e-commerce vertical of Paytm, position itself for a sellout or an IPO for its existing investors to exit. The company’s digital-wallet entity FreeCharge, which is on the block, is being dressed up to make it more saleable, with a fresh investment of $20 million announced last week and the strengthening of the top leadership deck with Jason Kothari as its new CEO and Ankit Khanna as COO.

The company has so far raised over $1.7 billion, including $200 million in early 2016. It expects to soon raise a much smaller amount, sources said. They also said there is enough money left in the bank to last another 12 months, but it was prudent to raise fresh funds as soon as possible.

The beleaguered e-tailer has cut down its monthly cash burn by 80 per cent, incurring a monthly spend of $4-$5 millionn at present, from $20-$25 million, which it is looking to further whittle down, in a bid to conserve cash, said sources privy to the latest developments. Meanwhile, founders Kunal Bahl and Rohit Bansal have given themselves two years to take the company to profitable growth, directing all their energies into execution of a business model that delivers the best customer and seller experience.

Second round of lay-offs

The e-tailer is in the process of quietly laying off another batch of 250-300 employees, after it laid off 400 employees early last month, said the same sources. With the second tranche of lay-offs in progress, Snapdeal’s headcount will be reduced to 2,250-2,300 before the end of the financial year, from the 7,000 employees it claimed to have in January 2016. BusinessLine had reported in February that Snapdeal is slashing its workforce of 5,000 down by nearly half.

In an all-out exercise to shed costs and conserve cash in a damp funding environment and dwindling investor interest, Snapdeal was forced to shut down Exclusively, its online platform for premium and luxury fashion goods, in August 2016, followed by Shopo, its C2C marketplace with 2 lakh sellers, last month.

Company sources told BusinessLine that cost-cutting on the technology side alone was reduced from ₹70 crore to host its services on Amazon Web Services, to ₹8- 9 crore. Plans are on to sell only those product lines that are profitable, which will result in a trimming down of product lines across categories, with a deeper focus on selling high-margin product categories, while at the same time delivering customer experience.

Published on March 23, 2017

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