E-commerce giant Snapdeal is all set to acquire its competitor Shopclues very soon

Key Highlights

Snapdeal is reportedly in talks for buying out its rival, Shopclues very soon. This deal is going to be an all-stock deal

Shopclues is reportedly set to get a 30% stake in the merged company according to the deal.

If this deal is successful, then every Shopclues investor will move to Snapdeal. These investors are likely to receive 1 Snapdeal share for every 9 they hold in Shopclues.

E-commerce mammoth, Snapdeal is reportedly in talks for buying out its rival, Shopclues very soon. This deal is going to be an all-stock deal. The deal had almost fallen through due to financial disagreements earlier but now seems to be back on track. The move comes as Snapdeal is preparing on competing with its rivals, Flipkart and Amazon better. The talks are in process between the two companies and a final decision is expected to be taken soon.

Shopclues is reportedly set to get a 30% stake in the merged company according to the deal.Radhika Aggarwal and Sanjay Sethi, the founders of Shopclues will be given a small cash exit as well.

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Also, if this deal is successful, then every Shopclues investor will move to Snapdeal. The investors of Shopclues include GIC fund, Tiger Global, Helion Venture partners, Unilazer Ventures and Nexus Venture Partners. Nexus Venture is a common investor in both companies. If the merger goes through according to the planned structured, these investors are likely to receive 1 Snapdeal share for every 9 they hold in Shopclues. This deal will give them 10% stake in the merged entity.  

Shopclues was started by Sandeep and Radhika Aggarwal in 2011. However, Sandeep left the company after a tiff with the board in 2016 and Sanjay Sethi took over as the CEO. The company aimed at providing a unique online shopping experience to its users.

However, the company has reportedly been swimming in troubled waters for the past year and welcomes this buy out by Snapdeal so that they don’t collapse their operations. The e-retailer has been losing steam quickly and the orders have dropped to a mere 30,000 in the past 1 year. It is also haemorrhaging cash steadily.Their deliveries have also dropped significantly, making the company a liability to do business with for the logistics industry.

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The traffic on Shopclues has also fallen from 16 million last year to 11 million, whereas Snapdeal has seen a steady increase in the traffic from 68 million to 82 million. However, Shopclues did show an increase in the total income, churning $25.81 million in 2017-2018. The company showed an increase of 40% from $28.17 million (₹208.14 Cr) generated in the previous year.

In last July, eBay showed interest in a merger with Shopclues. It also was in talks with major e-commerce companies like Paytm, Flipkart for a possible acquisition.  

If the deal with Snapdeal is successful then it might give a boost to the long-tailed e-commerce markets which largely serves small town consumers. The products that are sold on these long-tailed markets are usually moderately priced.

Snapdeal is slowly making its comeback by steadily increasing its orders which are now 250,000 per day. This is a huge resurgence in numbers which had fallen to as low as 30,000 per day for the company. The company also was in talks for a merger with Flipkart last year, however, the deal didn’t materialize.

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