Snapdeal to forgo acquisition of ShopClues over concerns of due diligence

by Apparel Resources News-Desk

20-June-2019  |  2 mins read

Snapdeal unlikely to acquire ShopClues
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ShopClues seems to be in deep waters now! Its all-stock deal with Snapdeal is unlikely to materialise.

The two e-commerce players have been in talks in the past but reached the due diligence phase for the first time. Post conducting due diligence with advisory firm, Ernest & Young, Snapdeal has stumbled upon some grave issues that might risk the acquisition altogether.

The deal which was initiated by Nexus Venture Partners, an investor in both the e-commerce firms, has raised concerns over multiple reasons. Snapdeal has seen a rapid decline in orders in the past few months out of which one-third are returned by customers while Snapdeal already deals with order volumes 8-10 times that of ShopClues.

In addition to the above, their customer base also overlaps, especially in Tier II, Tier III and Tier IV regions.

ShopClues has had a rough couple of months with most of its top executives right from the CEO, CFO, Head Category Manager to Manager for Corporate Communications, resigning.

With the deal having bleak chances of going through, ShopClues will have to downsize number of employees from its workforce of over 500.

Another reason for concern was the considerable liabilities that ShopClues comes with. The company posted a loss of Rs. 208.1 crore including outstanding payments to its marketing, logistics and technology vendors. If one were to add the tax liabilities, the total outstanding aggregates US $ 40 million-50 million, revealed sources.

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