Indian e-commerce firm Snapdeal is reportedly in talks to acquire rival online marketplace ShopClues in an all-stock deal.
The due diligence process has already begun and the proposed transaction is likely to value ShopClues at $200-250 million, a CNBC report on Tuesday said, quoting sources.
The development comes at a time when Snapdeal, dwarfed by Flipkart and Amazon, is looking to raise capital at a valuation of about $2 billion. If the proposed ShopClues acquisition fructifies, Snapdeal’s fundraising could become easier, said another report in Times of India. PwC is among the consultants currently working on the transaction, the report further stated.
In 2017, merger talks between Flipkart and Snapdeal had grabbed headlines with SoftBank making all efforts to push it through. However, talks had fallen through over valuation issues with both the companies failing to reach a consensus in terms of the deal and payouts.
For Snapdeal, which has been working on a 2.0 strategy thereafter to rebuild its business, the proposed transaction could mark a turnaround, thereby helping the Gurgaon-headquartered company to add a customer base in tier-III and IV markets where ShopClues is active.
For Shopclues, on the other hand, the deal could help scale up its operations as it is already struggling to meet orders. According to media reports, the company currently sees about 40,000 orders per day and has been in talks with multiple players for a merger – ‘for revival’ – in the past. Snapdeal reportedly garners around 2 lakh orders per day.
According to experts tracking the sector, it could be a ‘win-win’ transaction in terms of integration for both the companies who share venture capital firm Nexus Venture Partners as their common investor.
As of 2018, Snapdeal had a market share of 1.9 per cent, while ShopClues’ market share stood at 1.6 per cent, pointed out CNBC, attributing the numbers to Forrester Research.
Over the past few years, Snapdeal, which was once the second largest e-commerce company in India after Flipkart, has been focusing on sale in tier-II and III cities. It was pushed out of the race by homegrown e-commerce firm Flipkart (which is now majority owned by Walmart) and Seattle-headquartered Amazon’s India arm.