Why is Snapdeal going public? Here's what the founder has to say

Snapdeal has many requirements in place for an Initial Public Offering of equity but hasn't decided on whether and when.

If it does, it will be able to hit the market faster than anybody else, founder and chief executive Kunal Bahl tells Business Standard.

Excerpts:

You recently closed a significant deal by acquiring Frecharge. How is the deal shaping up?

We are seeing phenomenal results in the early days itself.

I am very sure this space of mobile top-ups to acquire customers is going to explode.

It is fair to expect 20-30 million people will eventually recharge online every day; Freecharge is already a leader and has the best potential to corner the lion’s share.

Also, since the merger, in less than two weeks, transaction value has gone up by 30 per cent.

How is customer acquisition cost shaping?

With a low transaction value on Freecharge, the velocity of new customer acquisition is very high.

So, Snapdeal’s new customer acquisition has doubled since the Freecharge acquisition.

The Freecharge customer acquisition cost is almost negligible.

So, our average customer acquisition is also coming down significantly, almost by 50 per cent.

One of every two online recharges should happen on Freecharge.

You have closed three deals this year. As indicated earlier, you are likely to go for another three this year. When are those expected and in which areas?

The number is precisely right and we are very focused on mobile.

There is a lot of innovation we are planning that will keep us ahead on the road over others in one or two years.

There are some very interesting companies we are looking at, that will enhance customer experience.

There aren’t that many large companies, so we will look at some mid to small size companies, which are very interesting.

When they become part of our system, they get the opportunity to become very big.

IPO plans?

An IPO is about a one-year process.

If I start today I can go public in 12-15 months from now.

It’s very distracting but we run the company already like a public company.

We do a quarterly forecast and then measure it like public companies.

I engage with internet analysts globally on what they think of our business.

So, a lot of the things are done from a financial perspective.

We are already doing that, which is what companies going public do.

So, from readiness of reporting and compliances, we are very ready.

We don’t have crazy government issues.

We have always been an Indian company and never got into crazy offshoring and stuff.

I am confident about the fact that if we decide to go public, it will take us much less time than others.

But, we need to make sure on why we are going public.

Will you go the app-only way?

We are a company that stands for choice, in everything we do.

For sellers and buyers.

We want to offer the mediums they want to use. . .Somewhere down the line, if PCs (personal computers) become so miniscule that it stops making sense, I can think about it. But, 25 per cent is still coming from PCs and I don’t think we should restrict that choice for consumers, as it generates a lot of negative reaction as well.

You are valued at about $5 billion (Rs 31,300 crore) but valuation differences have soured possible talks with one of the investors. How do you plan to resolve that?

There is always a lot of interest and we are always talking to a lot of people because that’s how good companies are.

You don’t talk to people only when you need the money.

So, we are talking but that does not mean we are raising money.

We don’t spend as much as others do, so we don’t need to raise as much as others do.

Are you looking to raise funds in the next few months?

We are focused on business right now, as this is an important year for Snapdeal.

Let others run after money.

We are excited about building the system and we are very focused.

But somewhere down the line, as we feel there is requirement for capital or some investor wants to invest more, like SoftBank, then we shall see.

Any timeline at all for going public?

We are looking but nothing has been decided.

Being a public company brings its own challenges, in its own dynamic and competitive way.

What is the feedback from investors?

About 90 per cent of the money we raised came last year and the average tenure is three to four years.

So, there is no pressure, unlike some companies where there are investors for the past 10 years. So, no issues as such with investors.

Are you interested in grocery?

We will assess, as I think everything can be explored, but a supply chain and on-demand is difficult and different.

So, grocery is very interesting but I want to wait and watch how it plays out.

With a number of companies under your umbrella, how does the future look?

The trajectory of business is quite good.

We believe that with these companies, the acceleration is going to happen over two years. Others are building aircraft carriers while we are building an army of speedboats, and it’s difficult to compete with so many speedboats.

How are you working out your profitability perspective?

For, RupeePower and Freecharge, there is no cost of logistics, a significant part of our business.

So, as these businesses get larger and contribution increases, the unit economics will start getting better.

Going further, after one point in time, marketing spends will come down and hiring only will need to be upgraded.

So, in many areas, costs will continue to go down but business will keep growing.

Image: Kunal Bahl; Photograph: Rediff Archives