"What are the risks of investing in the Snapdeal IPO? "

Snapdeal has filed a drafted red herring prospectus with the Securities Exchange Board of India in order to raise Rs 1,250 crore in an initial public offering (IPO).

Up to 30.78 million shares in the company have been offered for sale by existing shareholders and promoters.

Softbank will join seven other stakeholders in the OFS for partial departures, including Foxconn, Sequoia Capital, and the Ontario Teacher's Pension Plan Board. This is equivalent to about 8% of the company's pre-offer equity share capital.

Snapdeal is owned by 71 different individuals. Softbank holds 35.40 percent of the company, with 20.28 percent held by its founders Kunal Bahl and Rohit Bansal. The two founders' shareholding will not be diluted as a result of the IPO.

The revenues from the public offering will be used to fund expansion plans, develop logistics capabilities, and improve the company's technical infrastructure.

A look at the draught papers submitted with the market regulator reveals the company's risk assessment. Before investing in the public offering, let's take a look at the important risk considerations.

Before approving the draught prospectus, the Securities and Exchange Board of India will review it. Snapdeal would only reveal the price band and other IPO specifics after that. A closer examination of the document, however, reveals several distinct risk considerations that investors should be aware of.

Snapdeal has filed for an IPO ahead of its early competitors, the Flipkart Group and Amazon.com Inc.'s India business. After a rough stretch, the company pared back operations and now primarily fulfils low-cost orders. According to its statement, the site sold 70.74 percent of products priced up to Rs 500 in the six months ending Sept. 30. While comparable figures are unavailable, a Technopak analysis predicts that Flipkart and Amazon have a higher average order value of Rs 1,200-1,500.

Snapdeal reported $31.9 million in operating revenue in the six months ending in September in its prospectus released today.