The acquisition of ShopClues by larger rival Snapdeal is unlikely to materialise, sources said.
The two players were in talks for the acquisition in an all-stock deal. The companies have engaged in such discussions in the past as well, but this is the first time that it has made it to the due diligence phase.
According to sources close to the development, there are concerns regarding some of the findings emerging from the due diligence conducted by advisory firm, Ernst & Young.
When contacted, a Snapdeal spokesperson declined to comment on the status of the discussions with ShopClues or the findings of the due diligence report, citing confidentiality protocols.
ShopClues too declined to comment on the matter.
One of the persons said fall in the number of orders to about 25,000 a day, a high proportion of orders returned by the buyers and concerns around accumulated liabilities, potential litigation and unquantifiable tax risks seem to have made ShopClues an unattractive option for Snapdeal.
With nearly 500 employees, ShopClues could be forced to downsize rapidly in the coming weeks, the person added.
Another source said ShopClues is also exploring options with other platforms, even though these are in early stages.
ShopClues, in an emailed response, said its focus is on innovation and efficiency that has led to "spectacular improvements in revenues and economics".
"Our recently launched social selling platform EzoNow has 5 lakh resellers. We have expanded our rural offline stores to 20 in West Bengal and Odisha with two new ones recently opened in Eastern UP. Our smartship business has crossed 10,000 orders per day mark. Marketplace daily orders range between 65,000-70,000 a day," it said.
The email added that ShopClues has added 60 people in the last two months.
ShopClues (which is registered as Clues Network) posted losses of Rs 2.08 billion (Rs 208 crore) for the year ended March 2018. The company - which has raised about USD 250 million so far - focusses on tier II and III cities.
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