Snapdeal Files DRHP with SEBI worth Rs.1,250 Cr for IPO
Snapdeal has filed the draft red herring prospectus with SEBI for its proposed IPO. As per the DRHP, Snapdeal IPO will be a combination of a fresh issue and an offer for sale. The fresh issue will comprise of issue of new shares worth Rs.1,250 crore. In addition, Snapdeal will also do an offer for sale (OFS) of 3.08 crore shares to the public.
Snapdeal has Japan based Softbank as one of the early backers. Apart from Softbank, Snapdeal also has other marquee investors on its roster including Blackrock, Temasek, Sequoia and eBay. Many of these early backers will be looking to take a partial exit from Snapdeal via the offer for sale portion.
Snapdeal was founded in 2010 and it had emerged as veritable competition to Amazon and Flipkart in the Indian online ecommerce market. However, Amazon had the backing of its American parent while Flipkart was taken over by Wal-Mart. Over time, Snapdeal fell behind the curve as it could not purchase revenue growth like other digital plays in the market.
The most important turning point for Snapdeal came in 2017 when Softbank had tried to syndicate a deal to merge Snapdeal with Flipkart. However, the two original promoters of Snapdeal (Kunal Bahl and Rohit Bansal) decided to stall the merger and instead focus on realigning the business strategy of Snapdeal.
As part of the new strategy, Snapdeal set about in 2017 with 2 focus areas. Firstly, it decided to reduce its monthly cash burn. Secondly, it opted to focus on low value products and opted to specifically cater to the non-metro and non-English speaking population across smaller towns. This is in contrast to the metro focus of Amazon and Flipkart.
Currently, Snapdeal offers 6 crore items for sale in its online catalogue. Interestingly, more than 90% of the catalogue comprises of products that are priced under Rs.1,000 making it more of a mass market digital play. These products range from table mats, to tummy trimmers to beard grooming oils on its platform.
The proof of the pudding lies in the eating and the impact was visible in the recent festive season. The company witnessed 250% growth in sales in the fashion category and nearly 100% growth in the kitchen products and beauty categories. The traction is also visible in the revenue numbers for the September 2021 quarter.
Snapdeal is looking to capitalize on the burgeoning demand for digital IPOs in India. In the last few months, Zomato, Paytm, Nykaa and Policybazaar managed to collected Rs.40,000 crore between them through the IPO route. Clearly, Snapdeal also fancies its chances of making a digital splash in the IPO market.
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