Exclusive: ShopClues seeks buy-out by Snapdeal to avoid collapse

Beleaguered ShopClues is exploring a buy-out by Snapdeal, in a last-ditch effort to avoid an imminent collapse of its operations. Over the last two years, Shopclues has steadily lost momentum, with its orders dropping to less than 30,000/day even as it continues to lose money every month.

Entrackr’s sources reveal that ShopClues’ investors have refused to provide it any further lifeline, after financing an internal round of $16 million in August 2018. Earlier, ShopClues had also run through a venture debt funding of $7.7 million that it raised in May 2017.

The company has raised a total of over $200 million from Nexus, Helion, Tiger Global, GIC, and Unilazer Ventures and was valued at over a billion dollars in its last round of funding.

This is not the first instance when ShopClues had approached Snapdeal for a buy-out.

“Previously, the Tiger Global-backed venture approached Snapdeal a few times over the last one year for a buy-out, but Snapdeal has shown limited interest as it has been very focused on its own operations,” added two sources familiar with the talks now as well as several occasions in the past.

Sources requested anonymity as they aren’t authorised to speak to the media. The company also held talks with Paytm Mall and Flipkart for a merger in late 2017.

While the discussion is at a preliminary stage, it is understood that any possible deal will only be through a share swap arrangement, where the existing shareholders of ShopClues will get a small shareholding in the combined entity.

Queries sent to Snapdeal didn't receive any response at the time of publishing this article while ShopClues's spokesperson said, "We don't respond to market rumors." We will update when we get a response from Snapdeal.

Walking away from a forcible merger attempt with Flipkart in May-June of 2017, Snapdeal has executed a stunning turnaround by growing its volumes to more than 200,000 orders a day, even as it managed to simultaneously reduce costs by nearly 90 per cent in the same period.

Importantly, a part of Snapdeal’s growth has also come at the expense of ShopClues, which entered the unbranded products space earlier, but could not drive volume growth. In July 2018, Snapdeal became the first large-scale e-commerce enterprise in India to become cash positive.

The e-commerce saga in India scripts new chapters ever so often. Two years ago, Snapdeal was on the verge of being acquired by Flipkart. Soon, however, it was Flipkart that got sold to Walmart.

Working quietly and away from the media glare, Snapdeal used the opportunity to rejig, grow its business and reclaim the number three spot. It's now Snapdeal’s turn to play the acquisition game.