This is the second buy-out of Freecharge, first Jasper InfoTech sold it to Snapdeal in April 2015 and now Snapdeal is selling it to Axis Bank at Rs 385 crore ($60.04 million).
As per the deal, Axis Bank is paying Rs 385 crore to acquire 100% stake in FreeCharge, a steep markdown from Rs 2,400 crore that Snapdeal parent Jasper Infotech paid to acquire the company in 2015, which was the largest acquisition in the Indian startup sector at the time.
Happy to announce the partnership between Axis Bank and Freecharge. A great institution taking a fantastic business ahead! Kudos to FC team!
— Kunal Bahl (@1kunalbahl) July 27, 2017
Freecharge sale to Axis Bank will give Snapdeal much-needed breathing space while in talks to sell itself to larger rival Flipkart.
By buying Freecharge, Axis Bank will get a popular digital payments brand as well as access to high-quality technology that traditional companies typically struggle to build compared with internet start-ups.
Merchants: 1 million plus
Customers: 20 million
Founded in: 2010
Founders: Kunal Shah and Sandeep Tandon
Sold to Snapdeal in 2015
Deal value: $400 million
Present CEO: Jason Kothari
Investors: Tandon Group, Sequoia Capital, Sofina and Ru-Net, Tybourne Capital Management, SF-based fund Valiant Capital Management
The sale of Freecharge will mark the most stunning collapse in India’s start-up world, even more so than that of its parent company, which has seen its fortunes dip since the start of 2016. The company is estimated to have recorded Rs 300 crore in transaction revenue on about 12 million transactions in April.
Axis Bank and Freecharge are likely to announce the deal this week.
FreeCharge, similar to PayTM, started in the year 2010 focuses on a single product delivery: one stop destination for all Prepaid and Postpaid Mobile Recharges, DTH & Data Cards recharges along with recently included Mumbai Metro Card recharges. Since the focus of the company is on a single product it tends to achieve specialization and unique positioning in the eyes of actual and potential customers.
Within one year of its operations, Freecharge was having a huge consumer base of 1 million-plus unique users because of its unique business model, which is an enviable achievement for any organization, which is just one year old. This could be achieved because for every recharge done on Freecharge, discountcoupons of the equivalent amount were provided to the users.
Freecharge’s business model has a wide appeal in terms of the demographic profile of its customers, but the main customer segments comprise of young students, office going people who use prepaid mobile network services, are net savvy and carry a credit card or debit card. This gives a large and growing base of customers for freecharge to explore and offer its services.
Another giant of the industry – Snapdeal acquired it in the year 2015 for $400 million, making it the biggest acquisitions in the history of the internet industry in India.
The business model of Freecharge is based on the strategic choice to have a very sharp focused positioning of being a recharge platform. Its intent is to grow within this domain of e-payments and recharges rather than adding multiple solutions or services at the platform to increase the user base.
To promote itself, Freecharge dedicated a budget of Rs. 1,000 crores to be given back to the customers as discount coupons and cash-back for patronizing it and giving repeat business. This tested concept is core to its business model and has helped the company to grow enormously since its inception.