Snapdeal IPO

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Snapdeal IPO Details

Snapdeal Limited IPO
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Why Subscribe to Snapdeal IPO

Snapdeal Limited, India's largest pure-play value e-commerce platform, in terms of revenue for the Financial Year 2020. With over 200 million app installations on Google Play Store, it 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 in India. Founded in 2007, Snapdeal Ltd started its business as a coupon booklet business, which is transformed into an online deals platform in 2010 and an online commerce marketplace in 2012. Snapdeal’s value proposition meets the distinct buying needs of ‘Bharat’ shoppers. Its platform hosts a wide selection of merchandise across lifestyle categories: fashion; home and general merchandise; beauty and personal care; and others. The company strives to continue developing a network of sellers who can offer good quality products at value prices to its users. 

Objects of the Offer :

The offer comprises of fresh issue and an offer for sale. The fresh is of ₹12,500 mn, out of which ₹9,000mn will be utilized for funding organic growth initiatives and general corporate purposes. The offer also comprises of the offer for sale of 3,07,69,600 shares and the company won’t be receiving any proceeds from it.

Snapdeal IPO Analysis

Consistent track record of financial performance:

The e-commerce company has seen significant decline in its revenue in FY21, declining from ₹8,394.28 mn in FY19 to ₹4,717.56 mn in FY21. The vulnerable performance in the revenue came due to Covid-19 Pandemic related issues and partly due to delisting number of sellers that had consistently received low ratings. The company’s Adjusted EBITDA margin increased from (29.11) % in FY19 to (21.17) % in FY21. The company’s was able to decrease its loss from ₹ (1,880.31) mn in FY19 to ₹ (1,254.40) mn in FY21.

Consolidated Financial Summary Of Snapdeal

(`₹ in millions) FY19 FY20 FY21
Revenue from Operations 8,394.28 8,463.99 4,717.56
Adjusted EBITDA (2,443.88) (3,200.62) (998.67)
Adjusted EBITDA Margin (%) (29.11) (37.81) (21.17)
PAT (1,880.31) (2,735.40) (1,254.40)
NAV per share (16.35) (16.57) (13.16)
EPS (7.23) (6.94) (3.18)

Competitive Analysis: Market Peers

Softbank -backed Snapdeal is a worthy competitor to Flipkart and Amazon India, making its presence felt in India's expansive lifestyle space. Here's a look at its competitors in the stock markets-

Competitors Market Capitalisation
One97 (Paytm) ₹ 44,421 crore

Competitive Strength:

India’s largest pure-play value eCommerce platform

Snapdeal, India’s largest pure-play value e-commerce platform, in terms of revenue for the FY2020. Over 200 million app installations on Google Play Store, it 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 in India. Snapdeal Limited started in 2007 and its business as a coupon booklet business, which is transformed into an online deals platform in 2010 and an online commerce marketplace in 2012. Snapdeal’s value proposition meets the distinct buying needs of ‘Bharat’ customers. Its platform has a wide reach and is used by a large user base. Since the Financial Year 2018, 50.37 million customer shave transacted on its platform, and 42.04 million of these customers have come from locations outside metro cities, showcasing its nationwide reach. Snapdeal Ltd has an average of 40.15 million MAUs. Further, it has 13.88 million annual transacting customers for the FY 2021. The company had an average app rating of 4.5 out of 5 on the Google Play Store which has received over 2.3 million ratings from users. Its target segment comprises value-seeking, middle-income users who spend conservatively and access the internet primarily on their mobile phones. This demographic is located primarily in Tier2+ cities of India. 

Wide selection of value merchandizes at affordable prices

Snapdeal Limited attracts users through its platform’s wide selection of value merchandise, affordable pricing, quality, and a reliable user experience and makes a ‘one stop shop’ for its users’ value shopping needs. Its platform hosts a wide selection of value merchandise across categories, such as fashion, home and general merchandise, beauty and personal care and others. It constituted a 52.56%, 24.76%, 12.98% and 9.71% of the sales value on its platform for the six months ended September 30, 2021, respectively. Further, the e-commerce believes that the company and its sellers understand regional nuances, which leads to the listing of a relevant selection of products on its platform that are suited to the needs of users from across India. Its sellers consistently list new products with a view to stay on top of new trends which enables the company to showcase fresh selection to users when they visit Snapdeal. Its sellers also typically offer low pricing through-out the year and hence users can get best prices at all times, without having to wait for seasonal markdowns. The company continuously seeks to increase its users’ aspiration quotient, by attracting sellers that regularly list new and on-trend products with good quality without paying a brand premium. Its platform helps the users keep up to date with trends in a timely manner, as seller’ value prices are not dependent on promotional periods.

Discovery-led and personalized buying journey driven by artificial intelligence

Snapdeal Limited platform’s user interface is optimized for mobile phones, and for the six months ended September 30, 2021, 99.21% of its shipped units were purchased through its mobile application or the mobile version of its website. The proportion of shipped units purchased through its mobile application was 44.40%, 57.59% and 73.46% during the three months ended March 31, 2021, June 30, 2021, and September 30, 2021, respectively, and the majority of the remaining orders were placed on its mobile site. It believes with an increasing proportion of orders made on its mobile application, which would be able to better engage users browsing from its mobile application, through offering a richer and smoother browsing experience through content pre-loading, as well as through sending them personalized and attractive updates and notifications about products relevant to them and informing them of the prevailing offers and discounts. The company believes that it attracts users by providing an easy-to-use interface, which is coupled with a personalized browsing experience. It utilizes methods such as artificial intelligence, machine learning algorithms and data science to analyse large volumes of data relating to user browsing and purchasing behaviour, such as their activity history, geo-location and address history, category view history and product view history. Using this data, the algorithms automatically personalize the user’s experience to their tastes and preferences. Such personalization happens within a user’s product feeds that show the most relevant products and offers, as well as with attractive banners, pop-ups, notifications and other merchandising properties on its platform. In addition, the company conducts regular meetings with users, whereby its team engages with them to understand their perspectives and identify how it can continue to improve the platform for them.

High touch, easy-to-reach and multi-lingual user support for new and early internet shoppers

With its user interface platform, the company offers robust user experiences through high-touch and multi-channel customer support. Its customer support services include instant messaging with agent and chatbots on WhatsApp, telephonic conversations with live agents, self-help tips, FAQs and interactive voice response (“IVR”) menu or help-line number. Also, its customer service is refined for expedited resolution and efficiency through its tech-driven automated resolution methods. The company user support caters to the needs of all of its users, including its non-tech savvy shoppers, and it provide user support in various Indian languages. The company endeavours to resolve queries and issues raised by users expeditiously, assisted by mechanisms such as single-window user view for agents where they can access all information and tools to help resolve the query or issue of the user. For the six months ended September 30, 2021, 98% of WhatsApp queries were addressed within one minute. Further, it endeavour to maintain the quality of its user experience during peak or busy periods, through its ability to flexibly ramp up (or down) its user support, through the engagement of outsourced partners.

Proprietary technology stack custom-built for the needs of value eCommerce

Snapdeal has developed its own platform and technology stack using open-source technologies to tailor its platform closely to the needs and preferences of value eCommerce users as well as its own business operations. Its technology platform integrates its sales, user service and fulfilment operations. The company maintains its competitive advantage by continually innovating critical business functions through the use of technology and automating tasks over time. In addition, it utilizes data analytics capabilities, powered by scalable data engineering, to analyse large historical datasets of its operations and glean insights about both present and future user behaviour and preferences. It relies on such insights to optimize its app interface, craft its marketing campaigns, improve pricing and other strategies. The company further enhances its strategies through its experimentation engine, which assists the company in predicting and understanding the likely outcomes of its plans. Further, its user experience has been enhanced through its own customer agent support infrastructure that it developed inhouse, as well as its self-serve system for user queries. Its technology solutions and systems are maintained and enhanced by more than 230 of its employees in its technology, product, data sciences and engineering teams, as of September 30, 2021. It has minimized the need for outsourced technological solutions to reduce external dependence and operational expenditure. In particular, the company has its own data infrastructure and cloud service, SD Cirrus. In addition, the scalability of its platform enables the company to launch new features that it desires in a short period of time.

Weakness:

  • The e-commerce industry is highly competitive. The company can face serious challenges in order to gain the market share.

  • Maintaining brand image and reputation is very important for the sustainability of the company.

  • Company has had negative cashflows and incurred losses in the past and can continue to incur in future.

  • The nature of the business can get affected due to pandemic or lockdown like situation.

Opportunities:

  • Entering new geographies can significantly contribute towards the growth of the business.

  • Expansion into omni channel distribution using asset light model and offline channels as the company believes that it will help increase customer trust in the company due to their ability to touch, feel and try products.

  • Enhancing selling network for better pricing and margins can have a positive impact on the long term profitability for the company.

Threats:

  • The company depends on the Google play and Apple app store for offering and promoting the app. Any changes in the terms and conditions or violation the entire business will suffer.

  • The industry is sensitive to the information that is provided to the customers. If any misleading or infringed products are sold, the company may incur the liability

  • Changes in laws and regulations in the E-commerce space can hamper the business.

  • High dependency on customer’s engagement for the digital platform.

  • Failing to maintain technology infrastructure can materially affect the business.

  • Dependency of the stakeholders is high and any discrepancies can affect the overall growth of the business.

Strategies going forward:

Continue to acquire new users through marketing and continuous improvement of its platform

The online shopper base is projected to increase from around 140 to 160 million in the Financial Year 2021 to up to 350 million in the Financial Year 2026. As per RedSeer Report notes, a majority of the untapped value eCommerce users are and will be from the middle-income segment and located in the Tier 2+ cities. To capture such market opportunity, Snapdeal Limited focusses particularly on such value eCommerce users in Tier 2+ cities in India, as their aspiration and budget-based spending fits well with its user value proposition of value-for-money and quality products. It believes that doing so can drive the growth of its revenues. In this regard, the company believe that its brand and reputation for value e-commerce can contribute to attracting such users to use its platform. It plans to attract users by expanding the network of sellers who can provide good quality, affordable and trendy selection of the merchandize on its platform, as well as ensuring good user experience, as detailed below. With a view to attracting new users, it takes a multi-pronged approach towards marketing, through TV commercials and all key destinations for digital marketing, including social media, search engine advertisements, third-party ad-networks, short-video platforms, and engaging influencers. The company also works extensively on search engine optimisation and application store optimization to drive more users and traffic to its platform.

Increase existing buyers’ loyalty, repetition and the average spend of their purchases

Snapdeal also focused on leveraging its high brand awareness level and the large base of existing buyers, by increasing the loyalty of its existing buyers as well as increasing their wallet share. It plans to retain existing buyers through various promotions and offers that it makes available on its platform from time to time. It also plans to increase the proportion of its units that were purchased through orders placed on its mobile application, which was 44.40%, 57.59% and 73.46% during the three months ended March 31, 2021, June 30, 2021, and September 30, 2021, respectively. This is because the company believe that users who access its platform through its mobile application are better engaged and may be more likely to use its platform again. For its existing buyers, it also intends to increase loyalty and purchases on its platform and gain a higher share of its buyers’ wallet over time, by increasing the repeat, frequency and average spends from existing buyers. This will help grow its revenue from its sellers, which is based, in part, on the number and value of sales transactions on its platform. It intends to retain its buyers by providing benefits to its loyal buyers to increase their usage of its platform, and may also implement an appropriate loyalty pro-gram in the future. It has continuously taken steps to encourage sellers to further improve the quality of the products listed on its platform. For instance, it discontinued the sale of various products which user feedback indicated were of an inferior quality. As a result of its various quality improvement measures, the average product rating given by buyers on its platform improved from 3.2 out of 5 for the three months ended June 30, 2018 to 3.9 for the three months ended September 30, 2021.

Invest in its “Power Brands” portfolio and create a network of sellers

Snapdeal Limited seeks to further enhance its offering and reputation by expanding its “Power Brands” portfolio through expansion of product lines within the existing “Power Brands” and creation of new ones in more categories. It believes that this can strengthen its appeal as the go-to value e-commerce destination for its users. Further, it believes that there are assortment gaps in the value e-commerce market in terms of the confluence of quality, trust, price and value-for-money. It plans to address these gaps through the products of “Power Brands”. Its understanding of users’ search and buying behaviour helps the company screen and select sellers who can offer good quality and aspirational” products to its users in accordance with defined brand standards. Snapdeal supports these sellers by providing appropriate design, quality and packaging guidelines as per its brand standards. Through “Power Brands”, the company believe that it empowers sellers with branding capabilities to sell their products in an organised manner that they otherwise may not have. In addition, its “Power Brands” are also aimed towards making buying decisions easier and faster for its users, by presenting such products in structured and easily-accessible categories. Going forward, it may also explore appropriate brand acquisition opportunities to strengthen its house of brands portfolio strategy for “Power Brands”. The company has 13 Power Brands, which ac-counted for 5.60% of the total orders on its platform for the six months ended September 30, 2021. It aims to significantly increase the share of “Power Brands” to the total sales on its platform, and aim to do this by selecting appropriate products to develop “Power Brands” and adding new sellers to its platform. It plans to explore deeper tie-ups with manufacturers across a range of product categories. It also plans to increase the quantity and diversity of product offerings of its existing Power Brands. This presents an opportunity for the company to specifically target demand gaps, through data-driven insights and joint product development with its sellers.

Continue to enhance its seller network for better selection, pricing and margins

Snapdeal Limited intend to continue to enhance its network of sellers that have expertise and experience in serving the value e-commerce segment and offer quality products at value price points. This enables the company to benefit from synergies and deliver a wider range of product selections to its users at competitive prices. The company derives a significant majority of its revenue from its sellers, hence aims to further expand this network by investing in building new seller relationships while nurturing its existing seller relationships. It also seeks to diversify the product selections listed on its platforms, by onboarding new sellers. As it derives revenue from sellers partly based on commission on their sales transactions, the company encourage its existing sellers to list and sell more products on its platform. The company help sellers to strategize their offerings on its platforms, through sharing insights from analyzing its large historical dataset of its users’ purchasing behavior and patterns through data analytics. Through its analyses, the company can discover insights relating to demand trends, user preferences and search patterns and share such insights with the sellers, so as to enable them to offer relevant product selection at the relevant price point. These insights help its sellers access larger markets, use their resources more efficiently, bring in new and on-trend products. The company believe that with the improved business efficiencies and reduced wastage for its sellers, they are able to price competitively and drive effective margins for its platform. These insights help its Power Brand sellers as well.

Expand into omni-channel distribution using an asset-light model

Snapdeal plans to expand into omni-channel distribution to expand its reach and complement its online offering. As part of its expansion plans, it intends to create a distribution channel through offline stores, partnering with existing neighborhood stores and new franchisees, across the country. The company believe that its wide network of sellers, technology, marketing and data science capabilities will offer a competitive advantage to its partners and further increase its reach in the value segment. Several vertical category players and niche segment horizontal players in the beauty and personal care, eyewear and kid’s categories have already forayed into enabling offline presence, and have been able to capture user mindshare through omni-channel experiences. In addition, the value destinations in offline retail, in particular, have shown to be preferred by some users. It also believes that offline channels will help increase customer trust in the company due to their ability to touch, feel and try products. This may also contribute to improved user engagement, through real-time and in-person interactions.

Continuing to grow Unicommerce within India and international markets

Snapdeal Limited intend to grow Unicommerce, which was profitable for the financial years 2019 and 2021, within India and international markets. The company believes that there is scope for increasing the scale of Unicommerce by expanding its client base and geographical coverage, which it expects will further drive the growth of its revenues. Unicommerce’s offering is comprehensive and catered towards unsolved jobs of traditional and online retail. In the fast-growing retail SaaS market, Unicommerce is well placed against peers (domestic and international), as it offers a comprehensive suite of solutions to power its clients’ e-commerce operations. Unicommerce served over 350 enterprise clients across different segments of retail and eCommerce and over 2,000 small and medium businesses across India. Snapdeal Limited plans to grow Unicommerce’s existing client business in India through client acquisition initiatives. Unicommerce has already entered international markets such as Middle East and South East Asia and plans to scale client acquisitions in these geographies. In addition, it intends to enter new geographies, such as North America and Europe. Its plans for doing so include monetizing and retaining existing clients, as well as identify and capitalize on growth pockets in adjacent domains. Further, it also intends to utilize Unicommerce in its own omni-channel initiatives.

Disclaimer -

The content on this page is made available on the basis of the DRHP (draft red herring prospectus ) filed by Snapdeal Limited. The final content could change based on the Red Herring Prospectus (RHP) filed

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Snapdeal IPO Issue Highlights

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Frequently Asked Questions on Snapdeal IPO

01.5 things to know about Snapdeal IPO?

  • Snapdeal is one of the leading e-commerce portals based in New Delhi. The company was founded by Kunal Bahl and Rohit Bansal in 2010.
  • The company sells over 60 million products via 800 categories from local to international brands.
  • India's largest pure-play value eCommerce platform in terms of revenue for the Financial Year 2020. Further, with over 200 million app installations on Google Play Store, we are the most installed pure-play value eCommerce application and one of the top four online lifestyle shopping destinations in terms of total app installations in India, as of August 31, 2021.
  • As per the data, the company has over 5 lakh independent sellers selling on the Snapdeal marketplace and over 3700 town buyers are buying products from the online market.
  • The investors' portion for QIB is 75%, NII 15%, and Retail 10%.

02. Who is the promoter of Snapdeal?

The company is professionally managed and does not have an identifiable promoter in terms of the SEBI ICDR Regulations and the Companies Act.

03. How does Snapdeal plan to use the funds from IPO?

With the proceeds of the IPO, Snapdeal plans to fund organic growth initiatives.

04. What is the core business of Snapdeal?

Snapdeal Limited, India's largest pure-play value e-commerce platform, in terms of revenue for the Financial Year 2020. With over 200 million app installations on Google Play Store, it 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 in India. 

05. How much funding has Snapdeal raised till now?

Snapdeal has raised $1.8B in funding over 14 rounds. Their latest funding was raised on July 23, 2019, from a Venture-Series Unknown round. 26 investors fund Snapdeal. Anand Piramal and Nexus Venture Partners are the most recent investors.

06. Who are the lead managers for Snapdeal IPO?

  • Axis Capital Limited
  • BofA Securities India Limited
  • CLSA India Private Limited
  • JM Financial Limited

07. What are the views of different broking houses on Snapdeal IPO?

Not Available.

08. What is the expected opening date for Snapdeal IPO?

Not Available.

09. What is the issue size of Snapdeal IPO?

Snapdeal will be offering fresh shares worth Rs. 1,250 crore and 30.77 million equity shares via an Offer for Sale.

10. What is the expected market cap of Snapdeal?

Not Available.

11. Is Snapdeal, a profitable company?

Snapdeal is a loss-making company as of now. However, the company was able to decrease its loss from ₹ (1,880.31) mn in FY19 to ₹ (1,254.40) mn in FY21.

12. What is the grey market premium for Snapdeal IPO?

Snapdeal shares are not yet traded on the grey market.

13. What is the Shareholding pattern of Snapdeal?

Shareholding pattern Snapdeal

14. What are the key financial ratios of Snapdeal?

  • Snapdeal’s net cash and cash equivalents increased from (118.96) to 451.37 from March 2021 to March 2020. However, its Net cash used in operating activities increased from ₹(347.48) million for the Financial Year 2019 to ₹(3,718.39) million for the Financial Year 2020, decreased to ₹(914.88) million for the Financial Year 2021, and was ₹(1,101.44) million for the six months ended September 30, 2021.
  • Its EPS improved from (6.94) in March 2020 to (3.18). However, it remains negative.
  • It observed a decline in its revenue in FY21, from ₹8,394.28 mn in FY19 to ₹4,717.56 mn in FY21.
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