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Bunch of Deals: Snap Deal*

CASE STUDY, STRATEGY
ET Cases - FLAME, 10 Pages
AUTHOR(S) : Vinod M Lakhwani (Faculty), Dr. Vivek Ranga (Dean and Campus Head) and Toby Mammen (Faculty) - IBS Ahmedabad

Case Preview

Bunch of Deals: Snap Deal

 

On 5th May 2016, Snapdeal made its twelfth acquisition by grabbing TargetingMantra – a marketing technology firm having offices at Palo Alto, California and Gurgaon India. Since starting as a daily deal website in 2010 and adopting the online market place model in 2011, Snapdeal in its journey till date bought out - twelve companies and acquired majority stake in another three. With this string of deals, Snapdeal was able to expand its footprints in various verticals and became one of the major players in Indian e-commerce space though it neither achieved break even nor tasted profits.

Birth of Snapdeal

In 2007-2008, after working with Microsoft and CapitalOne, school friends Kunal Bahl (Kunal) and Rohit Bansal (Rohit) decided to start with their own business. The duo started with an offline coupon business named as MoneySaver in May 2008 and sold 15,000 coupons within three months. Looking at the success of business they decided to expand and started looking for funding. It was then that they met Vani Kola of IndoUS Venture Partners – a venture capital firm and after several round of discussions the firm agreed to invest. Many merchants working with them also recommended going online, and thus Snapdeal was born. It came into existence as a daily deal website in February 2010.

When on their visit to China in November 2011, Kunal and Rohit were astonished by the rapid expansion of Alibaba.com – the Chinese online market place and wanted to replicate the same model in India. Therefore in December 2011, Snapdeal scrapped their daily deals operations and moved into online market place.........

Indian E-Commerce Scenario

Indian e-commerce market has trod the route of quick growth. The sector registered sales of $16 billion in 2015 and was expected to reach to $137 billion in 2020. Increasing number of internet users, heavy discounts by online retailers, higher disposable income per person and young population were the driving factors of this segment...............

Grabbon: Beginning of Inorganic Growth

Within a span of five months of operations, in June 2010, Snapdeal made its first acquisition; Grabbon – (group buying site6) in a cash and equity deal. Grabbon had a wide reach in Bangalore – known as Silicon Valley of India. By acquiring Grabbon, Snapdeal got access to a ready market where it had no presence...........

Esportsbuy: The Hunting Continues

After a lull of almost two years in April 2012, Snapdeal struck a deal with Delhi based Esportsbuy – (a sports goods and fitness equipment etailer) by paying an estimated amount of INR50-75 crore. The portal, established in 2011 by IIT alumnus – Amit Monga and Prateek Agarwal, had annual turnover of INR 10 crore in a year’s time of operations...........

Shopo.in: Third Addition to the Cart

In May 2013, Snapdeal added Shopo.in to its portfolio. Launched by Theyagarajan S and Krithika Nelson in 2011 as an online shopping website for designer and handicraft products, Shopo.in could not be able to sustain due to low entry barriers, higher customer accretion cost, lack of differentiation, lesser number of buyers, same vendors selling on multiple channels, handling logistic and acquiring new customers............

Doozton.com: Stimulating the Growth

To spur further growth, Snapdeal purchased Doozton.com – a fashion and lifestyle product discovery and recommendation site in April 2014. With the help of Doozton’s technology one could identify the latest trends in shopping, suggestions from friends and people in Doozton’s circle..........

Wishpicker: Picked up the fifth firm

At the end of 2014, Snapdeal closed its fifth deal by picking up Wishpicker – an online gift recommending portal. Founded by IIT Delhi graduates – Apurv Bansal and Prateek Rathore in 2013, the website provided its users gifting suggestions for their friends, relatives, family members on the basis of several parameters like age, relationship, type of personality, etc..............

Smartpix: A Smart Move towards Online Comparison Site

Pursuing its quest for expansion, Snapdeal took a major stake in an online comparison site – Smartpix in January 2015. Earlier in 2014, it (Snapdeal) procured 10% share in Smartpix. With increase in the investment, Amitabh Misra – Snapdeal’s senior employee and Vice President – Engineering become a director in the board of Smartpix............

Exclusively.com: Strengthening Footprint in Fashion

In order to strengthen its footprint in fashion, Snapdeal got Exclusively.com – designer etailer under its umbrella. The move was similar to its homegrown competitor, Flipkart made in May 2014, by acquiring Myntra. Started in June 2010, initially Exclusively.com catered only to the US and the UK markets and thereafter targeted Indian customers............

GoJavas.com: Entering into Strategic Tie Up

Continuing the acquisition spree, in March 2015 Snapdeal entered into strategic partnership with GoJavas, a logistic firm. By procuring 20% share worth INR120 crore, Snapdeal made an investment that was the the first of its kind in the sector. With 60000 plus sellers and more than 40 million registered users Snapdeal was expecting the shipments from Tier II and Tier III cities to exceed 350 million by 2018..........

RupeePower: Forayed into New Vertical

In the same month, Snapdeal launched digital financial services by grabbing majority stake in RupeePower – an online distribution space for loans, credit cards and other personal finance products. RupeePower acted as a contact point between seeker and the lender, where borrowers could see and compare the various credit offers offered by banks and NBFCs and based on their eligibility and bank norms could avail the loan..............

Unicommerce: Building up the Logistics

Snapdeal closed the month of March 2015 by buying Unicommerce – a unit providing management and fulfillment solution to e commerce. It offerd a web based solution on the basis of pay per use for managing orders that were being placed, till it reached the end users to small merchants and e retailer firms.........

FreeCharge: The Largest Buyout

In April 2015, Snapdeal made the sizeable buyout in Indian consumer internet area. It inked the cash (30%) cum equity (70%) deal for INR2400 crore ($400 million) with Freecharge – an online recharge platform, leaving far behind the Myntra’s acquisition by Flipkart in May 2014 which amounted to $300 million.........

MartMobi: Providing Muscles to Vendor Partners

With an aim to provide muscles to its vendor partners, Snapdeal bagged MartMobi – mobile technology startup in May 2015. Brainchild of Pramod Nair and Satya Krishna Ganni, MartMobi commenced its operations in 2012 and developed mobile sites and apps for online stores and small scale and midsize businesses and having client base of 150 plus............

Letsgomo Lab: Betting Big on Mobile Commerce

Keeping the focal point on augmentation of mobile competencies, Snapdeal added Letsgomo Labs in June 2015. It offered mobile technology solutions to businesses starting with construct mobile strategies, ending at conceptualization of applications and mobile sites, implementation and hosting........

Reduce Data: Enhancing Advertising Campaigns Return on Investment

Marking its eleventh purchase, Snapdeal bought Silicon Valley based startup Reduce Data in September 2015 which used artificial intelligence, real time data and other tools to assist brands in formulating advertising strategies for consumers covering several platform and devices..........

TargetingMantra: Fabricating Customer Experience Engine

Starting with its first buyout in 2016, Snapdeal grabbed predictive marketing technology startup TargetingMantra in month of May. The firm was started by Saurabh Nangia and Rahul Singh in March 2013 and had expertise in creating products for amplifying the customer buying journey and escalate..........

The Path Ahead

In 2015, the Indian e-commerce sector was ruled by three major players (Exhibit I) with combined market share of 83%. Flipkart along with Myntra hold the first position with a 45% share, Snapdeal (excluding Freecharge) second with 26% and Amazon India third with 12%. In future,.................

Assignment Questions

I. Is Snapdeal has taken right path for expansion?
II. Too much focus on building infrastructure and technology right or wrong?
III. .........................

Exhibits

Exhibit I: Gross Merchandise Value for Top Three E Commerce Players

Exhibit II: Funds Raised by Snapdeal

Exhibit III: Snapdeal’s Revenues and PAT on Yearly Basis (in INR Crore)

Teaching Note Preview

Bunch of Deals: Snap Deal

 

Synopsis

The case depicts that with the series of acquisitions Snapdeal was able to expand their footprints in various verticals and has become one of the major players in Indian e-commerce space. This case has been developed with an objective of making students understand about need and thought for acquisitions, inorganic growth and business expansion.

Concepts like selection of targets, types of mergers, post-merger integration, building synergies and due diligence can be taught through this case.

The main focus of the entire case is on Snapdeal’s acquisitions, but neither has the move reached a breakeven point nor earned profits....................

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Abstract

Mergers and Acquisitions (M&A) are strategic moves made by a company for achieving inorganic growth. This path has been followed by many players in varied sectors, viz. FMCG, Pharmaceuticals, Auto and Steel. Indian e commerce companies too have stridden this track in their hunt for growth and market supremacy.

Kunal Bahl and Rohit Bansal started Snapdeal – as a daily deal website in February 2010 and later on moved into an online market place in December 2011. In the journey of more than six years, the firm bought fifteen companies – 12 completely owned and three with majority stake.

Within five months of operations, in June 2010 Grabbon – group buying site was Snapdeal’s first acquisition to start with. After span of two years, the firm bought eSportsbuy – sports good e –tailer in April 2012. Shopo handicraft marketplace was third addition in May 2013. Moving further, fashion product discovery platform Doozton and Whispicker a gifting recommendation portal were purchased in April and December 2014.

In 2015, it took a major stake in an online comparison site – Smartpix in January, thereafter acquired Exclusively.com an online fashion portal in February. Subsequently in March, Snapdeal entered into strategic partnership with GoJavas, a logistic firm and in the same month, picked up majority stake in Rupee Power – digital financial services platform and at the end of the month bought Unicommerce – a unit providing management and fulfillment solution to e commerce. Freecharge an online mobile recharge platform was the biggest consumer internet M&A deal made by Snapdeal in the month of April. MartMobi – mobile technology startup was brought under the roof in a month’s time in May. Letsgomo Labs – Mobility Solution Company was the tenth firm bought in June and Reduce Data was eleventh purchase made in September 2015.

Marking its first buyout in 2016, Snapdeal acquired predictive marketing technology startup – TargetingMantra in month of May.

The case depicts that with the series of acquisitions Snapdeal was able to expand its footprints in various verticals and has become one of the major players in Indian e-commerce space.


Pedagogical Objectives

  • To understand about need and thought for acquisitions, inorganic growth and business expansion
  • To discuss about Snapdeal’s growth over the years and various targets selected for merger
  • To discuss about Snapdeal’s inorganic expansion strategy and whether it is right choice
  • To analyse whether Snapdeal has to change its business model given the competitive scenario

Case Positioning and Setting
The case is appropriate for undergraduate as well as post graduate management students for teaching concepts like Mergers and Acquisitions in Business Strategy Course.


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