People who know Kunal Bahl will tell you that he is not someone who gives up easily. Bahl is the cofounder and CEO of Snapdeal, once India’s second largest ecommerce marketplaces, which is being forced into a merger with its biggest rival Flipkart.

Bahl has come up with a “Plan B”, in case the merger doesn’t go through.

Central to his plan is turning Snapdeal into a frugal operation, much smaller in size, and keeping away from directly going up against bigger competitors Flipkart and Amazon. “The plan is to become a much smaller organisation, bring down the cost of operations and run it profitably,” said a source, one of three who spoke with FactorDaily, asking their names not be taken because the merger negotiations are still on.

The idea, the source explains, is to find some niches and move out of some businesses. “Bahl has been in the business for long… He knows what makes money, and what doesn’t,” the source said.

Some of the areas that Bahl has identified is lifestyle and general merchandising. “Both these areas are highly profitable… Fashion makes money, general merchandising makes money. These markets are so fragmented that the longtail is really, really long,” the source said.

A second source said that Bahl had told the board that he wouldn’t need to raise any funding to run the business. The money required would come from selling off non-core businesses such as mobile wallet business FreeCharge, and delivery firm Vulcan. The proceeds would be used to turn around Snapdeal and make it profitable in the next couple of years.

An expert was dismissive of Bahl’s new idea, pointing to how many times Snapdeal under Bahl and co-founder Rohit Bansal has changed its business plan in the past.  “They have pivoted many times, a reason why investors have lost hope,” says Arvind Singhal, Chairman of Technopak Advisors, a consultancy firm. “There can be a Plan B, C or D but Bahl and Bansal have insignificant stake in the company. So the decision needs to come from the investors or the board. Also, it is very easy to scale down a venture but what happens to the value lost and the money put in by the investors, which is not the founders’ money?”

Nyet, says the board

Indeed, the board has been sounded out and has not been swayed yet. A third source said that Bahl had presented his Plan B to the Snapdeal board when the merger discussions with Flipkart had just started but it didn’t pass muster among the board directors.

“He had taken the plan to the board, but the board rejected it. SoftBank just wants to do the merger,” the source said. “The plan is little fuzzy, but a plan is definitely there.”

Snapdeal’s board consists of two members from SoftBank, its largest investor, one each from Nexus and Kalaari Capital, Bahl and Snapdeal cofounder Bansal, and telecom veteran Akhil Gupta who is the vice-chairman of Bharti Enterprises, which controls phone services firm Bharti Airtel.

It is not immediately clear if Bahl will press his board to reconsider his plan in light of hurdles coming up before the proposed merger. Investors and board members of Snapdeal have been unhappy with the valuation on offer in the merger.

In the past few weeks the merger has seen multiple challenges — it started with differences with Nexus Venture Partners and Kalaari Capital, and then with rising objection from smaller shareholders. The latest one happened on Tuesday when the SoftBank board rejected the offer made by Flipkart of $850 million, down from $1 billion it had agreed to, earlier.

The deal is being spearheaded by SoftBank, Snapdeal’s largest investor, and Tiger Global, Flipkart’s largest shareholder, which is also running the show at India’s largest startup.

“It is not about Flipkart or Snapdeal, neither about the board of Snapdeal. It is about SoftBank and Tiger Global,” said the first source. “The valuation is too low. Tiger Global has not given any reason why there has been a drop in valuation from the earlier agreed billion-dollar valuation.”

There are other problems, too. “For those who will get shares in Flipkart after the share swap, it is not problem. But for those who are cashing out, they want the money as soon as the deal happens,” said this source.

SoftBank, which is the prime driver behind the proposed merger with Flipkart, has delayed the acquisition of FreeCharge by Paytm, meanwhile, as the money would have gone to Snapdeal. Paytm is India’s largest mobile wallet company.

Lead visual: Nikhil Raj

Updated at 12:50pm July 6, the story was updated with the comment of Arvind Singhal, Chairman, Technopak Advisors.

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