India: Foxconn unit writes down an additional $40m on its Snapdeal investment

Snapdeal
An employee cleans a Snapdeal logo at its headquarters in Gurugram on the outskirts of New Delhi, India, April 3, 2017. REUTERS/Adnan Abidi

FIH Mobile, the Hong Kong-listed unit of Foxconn Technology Solutions, has written down an additional $40 million of its investment in once-prolific Indian e-commerce player Snapdeal.

The move follows FIH Mobile writing down 80 per cent of its $200-million investment in cash-strapped Snapdeal, operated by Jasper Infotech Pvt Ltd (JIP), early last year.

“As the recoverable amount of the investment in Jasper Infotech is minimal, the Group decided to make a further $40 million impairment loss as on 31 December 2017. As a result, JIPL represented no more shares of the Group’s total assets as on 31 December 2017,” FIH said in its annual report for 2017.

FIH Mobile led a $500-million equity financing round in Snapdeal in 2015, a transaction that valued the e-commerce company at about $5 billion, making it at the time one of the most-valued consumer internet companies to have emerged out of the Indian startup ecosystem.

FIH had put in $200 million in that round amounting to just over 4 per cent stake in the Gurgaon-based online market place.

According to FIH’s estimates, the recoverable amount of its investment in Jasper Infotech merely $3 million. It blamed the failed merger talks between Flipkart and Snapdeal as being one of the causes behind its decision to record $160 million impairment, last year.

Last year, after months of negotiations, spear headed by Japanese investment giant SoftBank that holds stake in both Snapdeal and Flipkart, the talks fell through when Snapdeal founders Kunal Bahl and Rohit Bansal pulled the plug on the discussions and decided to pursue an independent path.

“While the negotiation was finally terminated due to dissent of minority shareholders and complicated tax problems between Singapore and India. In 2017, the main market players had moved into the next stage to provide more products and services via collaboration with various business partners, which limited the room for JIPL to develop in the future,” it said.

Snapdeal was started by Kunal Bahl and Rohit Bansal in 2010. It is backed by investors such as Softbank Group Corp., Bessemer Venture Partners, Temasek Holdings, PremjiInvest, Alibaba Group, Nexus Venture Partners and Foxconn, among others.

The company has been streamlining its operations by selling non-core businesses to get its financials on track to be able to compete in a fiercely competitive market. The recent mega $16 billion acquisition of Flipkart by global retail giant Walmart to take on Amazon in one of the fastest growing markets in the world, is a prime example of the competition.

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