Snapdeal Eyes More Deals as Organic Growth Takes Too Long

Snapdeal, the Indian e-commerce startup backed by Softbank Corp. and EBay Inc., will keep buying companies as it works toward becoming profitable in two years.

Building everything from scratch is a losing proposition, Kunal Bahl, chief executive officer and co-founder of the five-year-old company, said in an interview.

“We’re not going to be frivolous about it,” he said on the sidelines of a Goldman Sachs Group Inc. technology conference in Hong Kong. “If there’s something we can’t build internally, then we’ll do it. If we want to do everything ourselves, we’ll be too late.”

Bahl said he expects Snapdeal to become profitable in two years, once its investments in logistics and technology infrastructure bear fruit. He has bought 10 companies in the past seven months, including most recently app-developer MartMobi, to capitalize on an acceleration in Indian e-commerce over just the past few years.

Snapdeal is eschewing a one-size-fits-all Amazon-style retail strategy in favor of connecting distinct marketplaces: one for luxury goods, another for consumer products and so on.

Snapdeal and local rival Flipkart are competing with foreign entrants alike such as Amazon.com Inc. in a growing market fueled by cheaper smartphones and rising incomes.

The potential for India’s e-commerce market, a vision stoked by the rapid evolution of China’s, is drawing billions of dollars of investment, spurring startups and boosting valuations.

Growth Money

Snapdeal raised 90 percent of its capital in just the past 11 months and is now valued at about $5 billion, Bahl said. Flipkart’s last round of funding valued it at $15 billion, according to the Wall Street Journal.

A lot of money will go toward the pursuit of growth for now, Flipkart Chief Financial Officer Sanjay Baweja said in an interview on Wednesday.

“There’s a lot of investment which is happening, in increasing reach, increasing scale,” Baweja said on the sidelines of the conference. “There’s a sense of a land grab.”

Soaring valuations have coincided with a persistent lack of profitability.

That’s normal in a market undergoing deep changes. Only about 2 percent of India’s retail sales is now online, versus the double-digit percentages in other more developed markets.

The growth of online commerce may, for instance, require heavy discounting initially that in turn pressures profitability.

“With every disruption, there’s going to be a bubble created,” Lightbox Ventures Partner Sandeep Murthy said in Hong Kong Wednesday. “To get you to change your behavior, I have to give you an incentive.”

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