IPO Alert: what to expect when Snapdeal goes public

The Indian e-commerce industry is one of the fastest-growing in the world. The Covid-19 pandemic accelerated digital adoption, which has increased the estimated gross merchandise value for the e-commerce industry to $55 billion.

The e-commerce shopper base in India is projected to reach 350 million by 2026 from 140-160 million in 2021. Meanwhile, the country’s consumer digital economy is expected to grow at a compound annual rate of 28% in the coming five years.

Snapdeal Ltd. recently filed preliminary documents with market regulator Securities and Exchange Board of India for an initial public offering.

The public issue comprises fresh issuance of equity shares worth ₹1,250 crores and an offer for sale of 3.07 crores equity shares, according to the draft red herring prospectus.

Snapdeal plans to use ₹900 crores from the net proceeds towards funding their organic growth initiatives, which include marketing, promotions and technology infrastructure. The remaining funds will be used for general corporate purposes.

In Growth Mode

Snapdeal is one of India’s largest pure-play value e-commerce platforms with over 200 million app installations on Google Play Store. The company is the most installed pure-play value e-commerce application and one of the top four online lifestyle shopping destinations in terms of total app installations.

The New Delhi-based company, which is backed by Softbank, BlackRock Inc, Temasek Holdings and eBay Inc, has been investing in promotional programs with the aim of expanding the online marketplace to new users, especially those from tier-II cities.

When Snapdeal was founded its main competitors were Amazon.com Inc. and Walmart’s Flipkart, but later the company lagged behind as rivals invested heavily in their businesses and grabbed market share. However, Snapdeal refashioned itself since then to stand out from its bigger competitors and focus on value-driven e-commerce.

Key Numbers

Snapdeal had total revenues of ₹510.2 crores in the year ended March 31, 2021, when it incurred a loss of ₹125 crores. The company had net revenues of ₹916.6 crores and registered a net loss of ₹273 crores in the previous year.

Snapdeal started its business as a coupon booklet business, which later transformed into an e-commerce platform. Since it is a relatively new player in the e-commerce market compared to competitors, the company has limited financial and operational data that can be used to evaluate its business and future prospects.