Indian online retailer Snapdeal may be forced to sell the company after it failed to seek investments to strengthen its finances and continue to be competitive, according to sources.
In the past few months, the company has been talking with Alibaba and some Chinese funds to raise money but failed to get their support. Its existing investors, which include Softbank and some U.S. hedge funds also showed little interest, the Financial Express reported.
"Snapdeal has been desperately looking to raise money in China for the last few months," a source with direct knowledge of company plans, said.
"It had multiple rounds of talks with some Chinese funds and was also hoping to get some fresh money from Alibaba. But those talks were not going anywhere and Alibaba made it clear to them they would not write a new cheque for them given the dim outlook for making money anytime soon," the source added.
According to the source, the failed negotiations and decreasing valuation may drive Snapdeal to decide for an outright sale. Last year, the company was valued at $6.5 billion after a fund-raising round but it weakened after that.
The company also suffered a blow from bigger rivals such as Flipkart and Amazon, which resulted in the layoff of about 600 employees and forced its founders to forego salaries to cut costs.
But Snapdeal, however, denied that they planning to sell the company, the report said.
About two weeks ago, a company executive had approved a plan to raise its profits, after seeing a "small gap in funding." The source said that the company hopes to strengthen its finances within two years, increase by fund-raising round, ahead of listing.
The source told Reuters that Alibaba was already in talks with Softbank, Snapdeal's biggest shareholder, but it was only interested in raising its investments. The Chinese e-commerce giant is willing to invest more in Snapdeal if management control will go to Paytm, it which it has 35.31 percent stake.
"Alibaba is very keen to invest more in Snapdeal as an entity if the management control goes to Paytm. The proposal has the backing of Softbank as well, which is also looking to consolidate its investments in one or two large e-commerce companies," the source said.
If the deal with Alibaba succeeds, it could make Snapdeal more competitive as its rival Flipkart is planning to raise its valuation to $1 billion and Amazon has already committed to increasing its investment to more than $5 billion last year.
Competition among rivals in India's e-tailers sector has caused Snapdeal a loss of about 29.5 billion rupees last year, records from regulatory filings showed.