Snapdeal plans to slash its entire workforce by nearly half from the current level of 5,000, even as its merger with the e-commerce vertical of Paytm is expected to happen in a phased manner. However, common investor Alibaba, which has a 3 per cent stake in Snapdeal and a 40 per cent stake in Paytm, is unlikely to front-end the operations anytime soon.
A spokesperson for Snapdeal officially confirmed on Wednesday that it will let go of 300 and 400 employees in the first tranche in the next few weeks. They will get three months’ severance pay.
The company is also learnt to be planning to put its digital wallet company, FreeCharge, on the block. FreeCharge CEO Govind Rajan resigned on Thursday. A detailed questionnaire sent to Snapdeal remained unanswered.
Snapdeal, founded by Kunal Bahl and Rohit Bansal in 2010, has seen its GMV (gross merchandise value) dip below $1 billion over the recent past. It has been unable to raise funds from existing and new investors for some time now.
In January last year, Snapdeal had told BusinessLine that its GMV was at about $4.5 billion and was set to overtake that of Flipkart by FY2016.
Reflecting the challenges it now faces, Kunal Bahl said in a letter to employees that “GMV is vanity, Profit is sanity”.
As of March 2016, Snapdeal’s net loss was ₹2,960 crore on revenues of ₹1,457 crore. Its net worth was ₹6,296 crore.
Sources said that for several months, Snapdeal’s management has started cutting employee pay by as much as 30 per cent. In the email to employees, the founders said they would not draw salaries till the company stabilises. Snapdeal’speople cost had ballooned to about ₹620 crore despite gradually reducing its workforce.
‘Mistakes committed’ The co-founders conceded they had committed mistakes in their execution of the company’s business plan. They admitted to diversifying and launching new projects without having perfected the first or made it profitable.
“For now, we need to keep our heads down, focus all our energy on execution that delivers on our two focus areas — best customer and seller experience, and profitable growth. This will mean tough choices and a conscious departure from a me-too race to the edge of the cliff. Let’s remember— GMV is vanity, Profit is sanity,” Bahl wrote in the email.