Snapdeal files DRHP to raise funds through an initial public offering

SoftBank-backed Snapdeal filed its Draft Red Herring Prospectus for its initial public offer (IPO), comprising a fresh issue of equity shares worth up to Rs 1,250 crore and an offer-for-sale (OFS) of up to 30,769,600 equity shares by existing shareholders.

Snapdeal’s Founders, Kunal Bahl and Rohit Bansal are not selling any of their holding in the IPO. Blackrock, Temasek, eBay, Intel Capital, Nexus Venture Partners, Tybourne, RNT Associates, Premji Invest, and others will also not sell any of their shares in the IPO.

Eight out of total 71 shareholders including SoftBank, Foxconn, Myriad Opportunities, Madison India, Sequoia Capital, Ontario Teacher’s Pension Plan Board, have offered to sell a portion of their respective shareholdings, collectively amounting to less than 8 per cent of the company’s pre-offer equity share capital.

The proceeds of the issue will be used for funding growth initiatives, expanding logistics capabilities, and enhancing the company’s tech infrastructure, Snapdeal said in the DRHP.

“Our Company proposes to utilise Rs 9,000 million towards funding our organic growth, which will entail expenditure on marketing and promotions, as well as enhancing our technology infrastructure, as we believe them to be the two key factors which contribute to our organic growth,” the company said in its DRHP.

In the financial year ended March 31, 2021, Snapdeal recorded revenue from operations at Rs 471.756 crore. Its restated loss for the financial years 2021 was Rs 125.440 crore.

The company’s delivered units have grown 86.3 per cent over the last two quarters from 4.61 million in Q4 FY 21 to 8.59 million in Q2 FY 22.

Once a competitor of Amazon and Flipkart, Snapdeal fell behind its larger rivals, and in 2017 went through a failed merger attempt with Walmart-owned Flipkart.

Thereafter, its changed its focus to being a “Bharat” focused player, which targets value-seeking, middle-income, price-conscious buyers who predominantly live in smaller cities of India. Snapdeal receives more than 86 per cent of its orders from outside metro cities.

Snapdeal, over the past three years, has pivoted from being an all encompassing e-commerce marketplace, to operating in a hyperfocused mode, to cater to the value conscious customer, with more than 90 per cent of products on its platform being under Rs 1,000. More than 95 per cent of the products sold on Snapdeal are priced below Rs 1,000 and more than 77 per cent of Snapdeal’s business comes from repeat customers.

Snapdeal’s asset-light logistics network covers 96.65 per cent of India’s pin codes. It served buyers from more than 2,500 cities during the six months ending September 30, 2021.

As part of its expansion plans, Snapdeal plans to expand into omni-channel distribution through partner-driven offline stores.

Axis Capital Limited, BofA Securities India Limited, CLSA India Private Limited, JM Financial Limited are the book running lead managers for Snapdeal for the IPO.

Financial metric	FY21	FY20
Revenue from operations	Rs 471.75 crore	Rs 846.39 crore
Restated loss	Rs 125.4 crore	Rs 273.54 crore
Marketing and business promotion cost	Rs 126.27 crore	Rs 176.68 crore