Bengaluru: The board of struggling online marketplace Snapdeal has rejected an offer of roughly $700-750 million from larger rival Flipkart, creating a new hurdle in a proposed deal that has attracted criticism from some Snapdeal shareholders, said three people familiar with the matter.

After completing due diligence on Snapdeal (Jasper Infotech Pvt. Ltd), Flipkart made the new offer late last week, said the people cited above. That offer, which is significantly lower than Flipkart’s opening bid of roughly $1 billion, has been rejected by Snapdeal, they said on condition of anonymity.

The deal isn’t off and negotiations will continue but the differences over Snapdeal’s valuation will delay the process, the people said. Flipkart’s offer is only for Snapdeal’s marketplace business; it doesn’t include Snapdeal’s payments arm Freecharge and its logistics business Vulcan, both of which are being sold separately, the people said.

The final price, and the fate of the deal, now depend on negotiations between SoftBank Group Corp. and Tiger Global Management, the two largest shareholders in Snapdeal and Flipkart, respectively, said the people. Apart from the proposed sale of Snapdeal to Flipkart, SoftBank is separately in talks to invest in Flipkart and buy a part of Tiger Global’s stake in the online retailer.

Flipkart and Snapdeal didn’t immediately respond to emails seeking comment.

The deal has hit hurdles right from the start. SoftBank has been pushing for a sale since March after Snapdeal lost out in the e-commerce war to Flipkart and Amazon India. Snapdeal co-founders Kunal Bahl and Rohit Bansal as well as two key Snapdeal shareholders, Kalaari Capital and Nexus Venture Partners, were initially opposed to a sale but SoftBank brought them around to pursuing the deal with Flipkart in May. Bahl, Bansal, Kalaari and Nexus are expected to receive cash payouts as part of the proposed deal.

Then there were other problems. Over the past few weeks, smaller shareholders in Snapdeal, including billionaire Azim Premji’s investment firm PremjiInvest, have written to the firm’s board, expressing unhappiness over the proposed sale.

If the deal goes through, it will be both the biggest-ever in India’s start-up business and the biggest distress sale.

Ironically, the largest deal currently is Snapdeal’s $400 million purchase of Freecharge in April 2015. Paytm is now in talks to buy Freecharge for just $40-50 million, Mint reported on 11 May.

Snapdeal, which has raised nearly $2 billion in cash, hit a peak valuation of $6.5 billion in February 2016 when it received $50 million from investors.

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