Snapdeal, one of India’s most prominent value-focused e-commerce platforms, is gearing up for its Initial Public Offering (IPO). With a strong presence in Tier 2+ cities, the company is looking to expand further and solidify its place in the e-commerce market. Here’s a detailed overview of Snapdeal’s IPO, its financials, strengths, risks, and more.
About Snapdeal Ltd
Founded in 2007 as Jasper Infotech, Snapdeal began as a coupon booklet business before evolving into an online marketplace in 2012. Over the years, Snapdeal has emerged as one of India’s largest pure-play value e-commerce platforms. The platform caters primarily to middle-income consumers in Tier 2 and Tier 3 cities, offering a wide range of products across categories such as fashion, electronics, home essentials, and personal care.
As of August 2021, Snapdeal had 40.15 million active users, with 77.01% of its revenue coming from repeat customers. The company generates its revenue from marketing fees, freight charges, and collection fees from sellers, alongside its SaaS solutions offered through its subsidiary, Unicommerce.
Snapdeal has grown substantially in the Indian e-commerce market, competing with giants like Amazon and Flipkart, and has established itself as a market leader in the value e-commerce sector.
Snapdeal IPO Overview
Snapdeal has filed for an IPO with an estimated size of ₹1,250 crore, which consists of a fresh issue worth ₹1,250 crore and an Offer for Sale (OFS) of 3.07 crore equity shares by its investor SoftBank. The IPO is aimed at raising funds for organic growth initiatives and enhancing its brand presence.
| Particulars | Details |
| IPO Size | ₹1,250 crore |
| Fresh Issue | ₹1,250 crore |
| Offer for Sale | 3.07 crore equity shares |
| Price Band | Not yet disclosed |
| Face Value | ₹1 per share |
| Registrar | Link Intime India Pvt Ltd |
| Lead Managers | Axis Capital, CLSA India, JM Financial, BofA Securities |
| Category Breakdown | – QIB: 75%- NII: 15%- Retail: 10% |
Snapdeal IPO Objectives
The funds raised from the IPO will be used to:
- Enhance Customer Engagement: Snapdeal plans to increase customer retention and attract new customers through attractive deals and offers.
- Strengthen Marketing Efforts: The company intends to expand its marketing strategy across multiple platforms such as TV, social media, and search engine advertising.
- Power Brands Initiative: Investing in the development of a network of high-quality sellers that offer affordable products.
- Build Omni-Channel Presence: Snapdeal aims to expand its reach through offline channels while maintaining an asset-light business model.
Snapdeal IPO Financials
Snapdeal has shown steady growth in revenue but has also faced challenges with profitability. The company’s profit after tax (PAT) has been negative, but its Net Merchandise Value (NMV) and revenue continue to grow.
| Financials | Q2 ended 30 September 2021 | FY21 | FY20 | FY19 |
| Total Income | ₹252.84 cr | ₹510.27 cr | ₹916.66 cr | ₹925.32 cr |
| Profit After Tax (PAT) | ₹-177 cr | ₹-125.44 cr | ₹-273.54 cr | ₹-187 cr |
| EPS (Earnings Per Share) | ₹-4.49 | ₹-3.18 | ₹-6.94 | ₹-7.23 |
| Net Merchandise Value (NMV) | ₹668.12 cr | ₹912.64 cr | ₹1,760.99 cr | ₹2,127.44 cr |
| Delivered Units (cr) | 1.5 | 1.9 | 3.5 | 6.3 |
| Revenue | ₹238.6 cr | ₹471.7 cr | ₹846.4 cr | ₹839.43 cr |
| EBITDA | ₹-170.45 cr | ₹-99.87 cr | ₹-320 cr | ₹-244.4 cr |
While Snapdeal has faced some losses, the company’s Net Merchandise Value (NMV) and delivered units continue to grow. The company’s revenue, contribution margin, and logistics investments provide a strong foundation for future growth.
Snapdeal IPO Analysis
Strengths:
- Market Leadership: Snapdeal is one of India’s largest pure-play value e-commerce platforms, ranking among the top four lifestyle shopping destinations.
- Wide Product Range: The platform offers a diverse array of products at competitive prices, ensuring it appeals to a broad customer base.
- AI & ML Integration: Snapdeal uses artificial intelligence and machine learning to deliver a personalized shopping experience.
- Efficient Logistics: Snapdeal employs an asset-light logistics model backed by third-party partnerships for pan-India delivery.
- Multi-Lingual Support: The company caters to diverse linguistic preferences, enhancing accessibility for first-time internet users.
Risks:
- Customer Acquisition: The company may face challenges in acquiring and retaining customers cost-effectively, which could hinder its growth and revenue.
- Profitability Concerns: Snapdeal needs to increase its delivered units and NMV to avoid continued losses and achieve profitability.
- Dependence on E-commerce Growth: The business is heavily reliant on the growth of e-commerce in India and shifting consumer preferences.
- App Store Dependency: Snapdeal depends on Google Play Store and Apple App Store to promote its app, which poses a risk if any violations of their terms occur.
Conclusion: Is Snapdeal IPO a Good Investment?
Snapdeal’s IPO presents an exciting opportunity to invest in one of India’s most prominent value e-commerce platforms. Despite facing challenges like profitability and fierce competition from giants like Amazon and Flipkart, Snapdeal’s market position and strong growth potential make it an interesting option for long-term investors. With a large and growing customer base in Tier 2+ cities and a clear focus on AI-driven personalization, Snapdeal is well-positioned to capture a larger share of India’s growing e-commerce market.
Before investing, potential investors should consider the risks, including Snapdeal’s dependency on customer retention and its reliance on major app stores. However, with a clear vision for expanding its Power Brands initiative and omni-channel distribution, Snapdeal’s IPO has the potential to offer strong returns for investors willing to navigate its challenges.
