Why Snapdeal debacle may compel Nexus to rethink its future direction

Japan’s SoftBank Group Corp., Snapdeal’s largest investor, is desperately trying to merge the company with its larger Bengaluru-based rival Flipkart in an all stock transaction that values the former at about $1 billion.

An employee cleans a Snapdeal logo at its headquarters in Gurugram . (Reuters photo)

By this time, Nexus Venture Partners, one of India's top venture capital firms, should have been sitting on a substantial pile of cash from the sale of its stake in troubled e-commerce company Snapdeal. Instead, for more than three months, the Mumbai-based firm has fought a bitter (but losing) boardroom battle to save its investment. At this juncture, it may have little choice but to walk away from what could have been its most lucrative bet with its principal investment and pride barely intact.

Delhi-based Snapdeal (Jasper Infotech Pvt. Ltd)—it has been widely reported—is up for sale and for a song. Japan's SoftBank Group Corp., Snapdeal's largest investor, is desperately trying to merge the company with its larger Bengaluru-based rival Flipkart in an all stock transaction that values the former at about $1 billion. Snapdeal was valued at $6.5 billion at its peak not too long ago.

As part of the transaction, SoftBank, which owns about 33% of Snapdeal, has offered to buy the stakes of Nexus and Kalaari Capital, another early venture capital investor in the company, for $60 million and $30 million, respectively. They each own about 10% and 8% of Snapdeal and enjoy veto rights on critical matters such as the proposed distress sale. Until recently, both were opposed to the terms being offered by SoftBank. But, early this month, Kalaari Capital managing director Vani Kola resigned from the company's board. That doesn't necessarily mean the Bengaluru-based venture capital firm loses its veto rights. However, if the move signals acquiescence to SoftBank's terms, which is more likely than not, it leaves Nexus with little leverage in its standoff with the Japanese media and internet conglomerate.

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