Homegrown e-commerce retailer Snapdeal is the latest entrant in the Indian capital market. The company has taken the initial public offering (IPO) route to fund its expansion and funding needs. The SoftBank-backed online retailer on Tuesday filed a draft prospectus with capital market regulator Securities and Exchange Board of India (SEBI) to raise up to ₹1,250 crore by fresh issue of equity shares. The IPO also consists of an offer for sale (OFS) of 30.8 million equity shares, as per the offer document.
With this, Snapdeal joined the league of SoftBank-backed companies such as payment solution firm Paytm, food delivery app Zomato and beauty retailer Nykaa, which listed their shares on Indian bourses to cash in on strong stock market rally, low-interest rates, and surging liquidity.
The current calendar year witnessed a flurry of IPOs by new-age internet companies, which indicated the future may be brighter and younger for Indian indices. Out of ₹1.14 lakh crore raised by 53 IPOs this year, a major chunk of fund - 37.28% (or ₹42,743 crore) - was raised by just seven such companies, including Paytm (₹18,300 crore), Zomato (₹9,375 crore), Nykaa (₹5,352 crore), Easytrip (₹510 crore), CarTrade (₹2,998 crore), PB Fintech (₹5,625 crore) and Nazara Technologies (₹583 crore).
Here’s all you need to know before investing in Snapdeal IPO:
Founded in February 2010 by Wharton alumnus Kunal Bahl and IIT Delhi graduate Rohit Bansal, Snapdeal competes with e-commerce majors such as Walmart-owned Flipkart and U.S.-based Amazon.com in India.
The New Delhi-based firm claims to be the largest pure-play value e-commerce platform offering value merchandise at affordable prices from a network of quality-focused sellers.
The IPO consists of a fresh issue of equity shares worth ₹1,250 crore and an offer for sale of 30.8 million shares.
The company is yet to finalise the offer price of the issue, which will be updated in the prospectus prior to filing with the Registrar of Companies (RoC).
A minimum of 75% quote would be reserved for qualified institutional buyer (QIB), 15% for non-institutional bidders, and 10% for retail investors, according to the offer document.
The company intends to use IPO proceeds to focus on organic growth initiatives. It proposes to utilise ₹900 crore towards funding its organic growth, which will entail expenditure on marketing and promotions, as well as enhancing its technology infrastructure.
As per the draft document, the amount utilised for general corporate purposes shall not exceed 25% of the gross proceeds.
The company believes that listing of its shares on the domestic exchanges will enhance its visibility and brand image in India.
The funding requirements for the IPO are proposed to be met from the net proceeds and its internal accruals.
For six months ended September 30, 2021, the company reported a net loss of ₹17.70 crore against a total income of ₹252.84 crore. Net cash used in operating activities stood at (-)₹110.14 crore during the period under review.
As per the company, its business depends on the growth of the online commerce industry in India and its ability to effectively respond to changing user behaviour on digital platforms. According to the RedSeer report, the value e-commerce market may reach $39.4 billion in size by the financial year 2026 from $7.4 billion in FY21, growing at a CAGR of approximately 39%.