Mumbai, July 27: After nearly a year of scouting for a buyer, struggling e-commerce firm Snapdeal on Thursday agreed to sell its payment wallet Freecharge to Axis Bank for Rs 385 crore, almost 90 per cent lower than what it had paid for the firm in 2015.
The price paid by the third largest private sector lender for the acquisition — which will help it double the customer base and address the digitally savvy people – is also higher than what was reportedly offered by other suitors.
According to some reports, others were offering USD 15-20 million for Freecharge, which was acquired by Snapdeal for USD 400 million in 2015 during heady days for the e-commerce sector in the country.
Rival e-commerce company and wallet Paytm had made an offer USD 10-20 million for Freecharge, while Amazon also made a late bid for the digital payments platform.
From business as well as value addition angles, the deal does not make much sense as other banks have been going slow in investing in wallets after the Reserve Bank-promoted National Payments Corporation has launched UPI and IMPS applications which are more secure and customer-friendly.
Echoing similar views, Sandy Shen, a research director at Gartner, said, “Though the acquisition will give Axis Bank a jump-start in customer acquisition, whether the bank can keep growing that number is a question.
“Digital wallet is a highly competitive space with dozens of players and it takes lots of efforts and resources to increase merchant acceptance and offer good services, which is key in winning over the customers,” he said.
Stating that it is difficult to put a price tag for such buys, Axis Bank managing director and chief executive Shikha Sharma said, “What we are excited about is its tech platform, its capabilities, customer base and the brand. We’d certainly like to continue with the brand.”
Interestingly, the announcement comes at a time when sale of parent Snapdeal to bigger rival Flipkart is in the final lap and will give it a headroom.
“This is a win-win deal that allows Snapdeal to further focus on our core e-commerce business, while giving Axis Bank some of the most agile and innovative capabilities in the financial services space in the country,” Kunal Bahl, Snapdeal co-founder and chief executive, said in a video call.
Freecharge has 5.4 crore registered users with 70 percent of them being under-30 years, as against Axis Bank’s 2 crore savings bank account holders and 30 lakh other usersfrom its brokerage and mutual fund and other borrowers. b
