Snapdeal IPO: Do you also want to invest in Snapdeal IPO ?

Snapdeal IPO

According to DRHP filed for IPO, this will include an offer to sell more than 3 crore equity shares under which the existing shareholders of the company will sell their partial stake.

Snapdeal IPO

Online Marketplace Snapdeal Market regulator SEBI has filed an application for an IPO of Rs 1,250 crore. The proceeds from the IPO will be used by the company to expand its plans, increase its logistics capabilities and improve the company's technology platform. According to the DRHP filed for the IPO, this will include an offer to sell more than 3 crore equity shares under which the existing shareholders of the company will sell their partial stake. Axis Capital Ltd, BofA Securities India Ltd, CLSA India Pvt Ltd, and JM Financial Ltd are the booking lead managers of this IPO. Many people want to invest in these IPOs, but there are also risks involved.

1) Declining income

Snapdeal earnings have plummeted due to the Corona epidemic. In the financial year 2020-21, the company's revenue is Rs. 471.76 crores as against Rs. It is 44.26 percent less than Rs 846.39 crore. Given the risks associated with Omicron, the company may have difficulty in increasing its earnings.

2) Ongoing damage

The company has never made a profit since its inception. The company had a loss of Rs 125.44 crore in FY2021 and Rs 273.54 crore in FY20. The company had a net loss of Rs 177.08 crore for the nine months ended September 2021. Although the Indian economy is in recovery mode, there is no major change in the company's profitability.

3) Uncertain future

Snapdeal itself has admitted in its IPO draft paper that it is uncertain about the company's turnaround. The company may suffer losses in the future. The company further stated in the draft paper that it would be difficult for us to make a profit if we fail to increase delivery or NVM and add new customers financially. If the company continues to make losses, the business of the company and the value of its shares may be adversely affected.

4) Negative cash flow

The company's cash flow has been negative for many years. In the financial year 2021, the net cash used in the operations of the company was Rs. 91.4 crore as against Rs. 3718 crore. "Any negative cash flow in the future could hurt the company's business and financial position and we cannot guarantee that the company's cash flow will be positive," the company said in a draft paper.

5) Decrease in market value

Snapdeal's Net Merchandise Value (NVM) of Rs. 1,760.99 crore in FY21 to Rs. 912.37 crore. Similarly, delivery units also cost Rs. 3.45 crore to Rs. 1.85 crore.

6) Strong competition

Snapdeal faces big players like Amazon and Flipkart. Apart from this, Reliance Industries and Geo Mart are also in the fray, which is constantly expanding their business.

7) Macro Economy Factor

Snapdeal said the company's business could suffer if macroeconomic conditions are not favorable. If the general business situation in a particular market or global economy worsens, consumers can reduce their costs. Reducing consumer costs can adversely affect a company's business.

8) Changes in policy

The government is currently preparing to amend the Consumer Protection (E-Commerce) Act. Under which registration rules for online retailers, ban on flash sale, ban on the promotion of private level brands, laws related to monitoring the relationship between online marketplace operators and their vendors may be enacted. Snapdeal fears that if such laws are implemented, it could pose a problem for the company shortly.

9) Salary increase

If the wage code recently introduced by the government is implemented, there will be a big change in the way companies and their employee's work. This will lead to significant changes in employees' working hours, their take-home salary, and their other rights. Which can increase the labor cost of companies. Snapdeal may also face this rising cost.

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