A Year After Turning Down A Merger With Flipkart, Snapdeal Claims It Is Now Cash-Flow Positive

OfficeChai Team

Snapdeal might’ve gone through a near-death experience last year, but it’s living to tell the tale.

Snapdeal has claimed that it’s now cash flow positive in a letter to its employees. “It is with great pleasure and pride that we share with you that Snapdeal was cash flow positive for the month of June 2018. Simply put, we have now achieved the milestone of earning money from our business,” the letter said.”This is an incredible achievement for our company and our industry,” the letter added.

 

For most businesses, making money wouldn’t necessarily be an “incredible achievement” after a decade of operations, but Snapdeal was hemorrhaging bucket-loads of money for most of its existence. In FY15, Snapdeal had lost Rs. 1,328 crore. In FY16, it ended up doubling its lossses, losing Rs. 3,316 crore that financial year. In FY17, Snapdeal’s losses were Rs. 4,647 crore.

It was then that Snapdeal had begun unraveling. After struggling to raise a further round of funding, Snapdeal had fired over a thousand employees, and co-founders Kunal Bahl and Rohit Bansal had publicly declared they’d take no salaries to help the company tide over the crisis. Other issues also loomed — Snapdeal was dragged to court several times for not paying its dues, and also publicly called out on Twitter for delaying its payments to suppliers.

At this point, Snapdeal’s investors, led by Softbank and Kalaari Capital, had tried to negotiate a merger with its biggest competitor, Flipkart. But after months of speculation, the deal hadn’t gone through, reportedly because of the insistence of Snapdeal’s founders. It was then that Snapdeal had fallen out of favour with its investors as well, with Kalaari Capital’s Vani Kola saying that the decision to not merge with Flipkart was “extremely disappointing”, and not in the best interest of the investors or the employees.

Snapdeal, for its part, had then announced it was pivoting to something called Snapdeal 2.0, which would involve the company controlling its burn rate and moving to a marketplace-led model. The move hadn’t been particularly well received internally — several of Snapdeal’s senior management had quit following the announcement. An anonymous letter written by Snapdeal employees to the Prime Minister of India had also surfaced, and it had alleged that the plan was unlikely to work, and would bring more pain to the company’s employee and shareholders.

But Snapdeal seems to have ploughed on with its model, and nearly a year after its announcement, has something to show for it. It doesn’t mean that the company is out of the woods yet — it’s only been cash flow positive for a month, and would need to consistently produce similar results to complete the turnaround. Also, Snapdeal hasn’t revealed its overall profitability numbers — Snapdeal could still be languishing in losses from fixed expenses, even though it’s cash flow positive on a monthly basis. But it does show that Snapdeal is still fighting to stay relevant in India’s e-commerce race — Snapdeal might have been left by the wayside by Flipkart and Amazon, but is trying hard to find its own place in India’s e-commerce setup.