Snapdeal to pay $30mn to its staff if deal with Flipkart goes through

Will employees at Snapdeal get a fair deal amidst all the brouhaha over the proposed sale of the beleaguered online marketplace to its larger rival Flipkart? Will they get absorbed by Flipkart? Will the senior leaders who got ESOPs in Snapdeal, get them in Flipkart too?

While some of these questions still remain unanswered as the final details of the transaction is being fine tuned, employees at Snapdeal can breathe a sigh of relief. As much as $30 million is kept aside for the entire management team and staff at Snapdeal, said two persons familiar with the development.

“It (the amount) will be distributed among the employees over a period of next six months,” said one of the persons. Snapdeal founders Kunal Bahl, a Wharton graduate, and his schoolmate and an alumnus of IIT-Delhi Rohit Bansal, will be given $15 million each.

So far, the senior management of Snapdeal felt disgruntled as their ESOPs were not realised by the company. “The fat pay package is only on paper. The equity has not even been realised and is equivalent to tissue paper now,” said a senior executive on condition of anonymity. However, a part of $30 million paid out may now compensate for the ESOPs that were doled out them.

"Going forward, it needs to be seen which employee gets how much. There is no clarity on that. If need be, there will be a committee set up to see how the money is distributed," said one of the people mentioned above.

An email sent to Snapdeal spokesperson did not elicit any response, while Softbank executive declined to comment on the development. Talks between Softbank, Snapdeal and Flipkart are at an advanced stage. Forbes India first broke the story in its online edition dated April 4, 2017. When contacted, Flipkart too declined to comment on reports of talks with Snapdeal.

If the deal goes through, Snapdeal’s existing investors Kalaari Capital and Nexus Venture Partners, who are negotiating with SoftBank, will pocket $30 million and $60 million, respectively. SoftBank — the largest investor in Snapdeal —  which recently made headlines for writing down its investments in Snapdeal is leading the  talks for the proposed sale of the ecommerce firm is and negotiating to make a separate investment in Flipkart through the proposed transaction.

What went wrong?
Both Bahl and Bansal had written a letter earlier to their employees stating the problem. “At Snapdeal, we find ourselves at an important point in our journey - we know where we want to go and now is the time to make the choices of how we will get there....Has our company and industry been going through a troubled time? Absolutely. Did we make errors in our execution? No doubt about that......Over the last 2-3 years, with all the capital coming into this market, our entire industry, including ourselves, started making mistakes,” they said adding, they started growing their business much before the right economic model and market fit was figured out.

“The horizontal e-commerce whether marketplace model or otherwise is facing their ‘moment of truth’ after scaling at a rapid pace over the last five years,” K Ganesh, Partner, Growth Story, an entrepreneurship platform that promotes greenfield ventures, had earlier told Forbes India.