Here's why Snapdeal postponed its IPO; Founder Kunal Bahl explains the reasons

Snapdeal, the Indian e-commerce company founded in 2010, had plans to go public in 2021, but the IPO was postponed due to market conditions. Business Today had the opportunity to interview Snapdeal’s founder, Kunal Bahl, to gain more insight into the company's decision.

Bahl, who is also an investor in seed stage start-ups through his VC firm Titan Capitals, explained that the capital constraint "was not just from private equity players becoming tight-fisted but also from how much money companies were able to tap from the equity market."  He noted that the postponement of Snapdeal's IPO was a result of market conditions, i.e., that the company could not access as much capital as it hoped.

Moreover, Bahl further noted that despite the much fanfare that several new age digital companies received when they listed in the Indian stock markets, now investors are focusing on profitability and cash flows.

"And I think that has been a valuable learning for the entire ecosystem. And which is why it's no surprise that companies across the board in our ecosystem are optimizing for profitability because everyone realises that, look, eventually there will be some amount of M&A in the private markets," said the founder of the ecommerce company.

He added that unless enough companies in the tech sector, which are private today, list in the public markets in India and have a successful listing, there would be a ceiling in terms of their own valuation growth and their attractiveness to growth investors.

"Look eventually, there will be some amount of M&A in the private markets. But unless enough number of companies in the tech sector, which are private today, list in the public markets in India and have a very successful listing and build lasting, enduring public companies generating cash flows, growing their valuations and rewarding shareholders, unless that happens, there is almost like a ceiling that will exist which the private companies will keep running into in terms of their own valuation growth," said Bahl.

Bahl emphasized that the answer was not in when the markets would open up and create suitable conditions for new age companies to list but when companies in the sector would be ready to generate enough cash flows and profits that the public markets found them more enduring and valuable.

He concluded by saying, "In summary, I feel that the answer is not in whether when the markets will open up. The answer is when will the companies in our sector be ready with generating enough cashflows, enough profits, that the public markets find them more enduring and valuable."

Snapdeal is not alone in postponing its IPO due to market conditions. Many other Indian companies, like the content to commerce platform Good Glamm Group,  hotel aggregator OYO, jewelry chain Joyallukas, wearables brand boAt, and many others have done the same.

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