SoftBank investing $627M in Snapdeal

Japanese telecom and internet firm SoftBank Corp. has sealed a $627 million (Rs 3,846 crore) funding deal with Indian e-commerce marketplace Snapdeal.com, in the second biggest fundraising round by an Indian e-com firm, after Flipkart's record $1 billion funding round early this year.

The deal is being routed through SoftBank Internet and Media, Inc. (SIMI), a new unit created a few weeks ago with Nikesh Arora as its head. Arora, a former top honcho at Google, was roped in by SoftBank chief Masayoshi Son especially to lead investments in the internet domain.

According to Snapdeal, its existing investors have also put in a 'significant' amount, along with SoftBank, in this round taking the total funding this calendar year to around $1 billion. It is not clear how much the existing investors have infused but as per public statements Snapdeal had raised $239 million early this year, which adds up to $866 million.

This could mean the existing investor have put in around $100-125 million in the latest round.

Snapdeal spokesperson declined to share further information on the money put in by its existing investors.

Its other investors include eBay, Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital, Ratan Tata, BlackRock, Temasek, Myriad Asset Management, Tybourne Capital, PremjiInvest and Saama Capital. With the latest deal, SoftBank becomes the largest investor in Snapdeal.

Snaodeal had previously raised around $86 million from its previous investors and with the latest transaction its total funding to date has exceeded $1 billion.

Snapdeal said in a statement that it is planning to ramp up its efforts in technology and supply chain management, in addition to making three-four strategic acquisitions in the coming few months, specifically in the area of mobile technology.

The company will open innovation centres in Hyderabad and Pune. As of now, the company operates innovation centres in Delhi and Bangalore. It will also double its technology team size to 1,000 people by the end of the current financial year. In addition, Snapdeal will set up an incubation centre to hone and harness startup businesses in the mobile technology space in the next six months.

Snapdeal also looks to expand its fulfilment centres to 30 cities. Currently, it has 40 fulfilment centres across 15 cities.

VCCircle had reported last month that Snapdeal was close to raising a significantly large round of funding of around $500 million with an Asian investor and was in talks with SoftBank for the same. As first reported by VCCircle, the company had asked its financial advisor Credit Suisse to scout for $300 million from private investors.

Snapdeal, founded in 2010, was started as an online deals site, which later pivoted to a full-fledged horizontal e-commerce company with a marketplace model in September 2011. Run by Delhi-based Jasper Infotech Pvt Ltd, it has become one of the fastest growing and among the top three online marketplaces in India, with more than 25 million registered users and more than 50,000 vendors.

Through this strategic investment and partnership with Snapdeal, the SoftBank Group aims to strengthen its presence in India and leverage synergies with its network of internet companies around the world.

"We believe India is at a turning point in its development and have confidence that India will grow strongly over the next decade. As part of this belief, we intend to deploy significant capital in India over the next few years to support development of the market," said Masayoshi Son, chairman and CEO of SoftBank Corp.

"India has the third-largest Internet user base in the world, but a relatively small online market currently. This situation means India has, with better, faster and cheaper Internet access, a big growth potential. With today's announcement SoftBank is contributing to the development of the infrastructure for the digital future of India," said Nikesh Arora, vice chairman of SoftBank Corp. and CEO of SIMI. Arora will be joining the board of Snapdeal as part of this strategic investment.

Kunal Bahl, co-founder and CEO of Snapdeal, said, "With the support of Son and Nikesh, we are confident we will further strengthen our promise to consumers and create life changing experiences for 1 million small businesses in India."

SoftBank has been aggressively looking at the Indian internet market for the past few years, and Snapdeal is its biggest bet on India, after its infusion of $200 million into mobile advertising firm InMobi in 2011. Along with the Snapdeal deal, SoftBank has also announced an infusion of $210 million in Olacabs.com, an online marketplace for cabs and car rental services. The Japanese telecom major is also operating a joint venture with Sunil Mittal-run Bharti Group. Called Bharti SoftBank (BSB), the JV is running an instant messaging (IM) app service called Hike.

Morrison & Foerster LLP acted as legal advisor to SoftBank on the latest deal with Snapdeal, with Kochhar & Co. advising SoftBank on India law matters.

Most recently, Snapdeal created headlines when it raised an undisclosed amount of funding from Ratan Tata, former chief of Tata Group and currently chairman emeritus of group's holding company Tata Sons. This was the first publicly known personal investment of Tata, who has invested in his personal capacity.

Prior to attracting investment from Tata, in May, Snapdeal had raised $100 million (Rs 590 crore) from a group of new investors including US-based BlackRock Financial Management, Singapore's sovereign wealth fund Temasek, Hong Kong-based Myriad Asset Management and Tybourne Capital Management, besides PremjiInvest, the personal investment vehicle of Wipro chairman Azim Premji.

This funding came barely three months after the e-commerce player raised $133.77 million (Rs 830 crore) in a round led by existing investor eBay Inc with participation from other existing investors Kalaari Capital, Nexus Venture Partners, Bessemer Venture Partners, Intel Capital and Saama Capital.

(Edited by Joby Puthuparampil Johnson)