BENGALURU: E-commerce marketplace Snapdeal has acquired online recharge
Snapdeal co-founder
and CEO Kunal Bahl said here on Wednesday that the joint entity would
create the country's largest mobile commerce platform with over 40
million customers. About half of that comes from FreeCharge.
The deal is said to be 30% in cash and 70% in stock. The transaction was done at a $5 billion valuation for Snapdeal.
Snapdeal co-founder and CEO Kunal Bahl said here on Wednesday that the joint entity would create the country's largest mobile commerce platform with over 40 million customers. About half of that comes from FreeCharge.
Flipkart, with which Snapdeal is in fierce competition, has 30 million registered users. Flipkart had acquired online clothing firm Myntra for over $330 million last year.
FreeCharge gives Snapdeal access to a much younger audience. While most Snapdeal customers are in the 25 to 35-years age group, most FreeCharge customers are 18 to 25 years old. The venture, which started in 2010 and whose core strength is mobile phone recharges, is popular with the youth because the segment tends to use small pre-paid packages and FreeCharge offers free coupons of various kinds with every recharge. Bahl said Snapdeal and FreeCharge would be able to cross-sell services on each other's platforms.
This is Snapdeal's fifth acquisition in just the past year. Since April last year, it has acquired a social fashion discovery platform, a gift recommendation site, a luxury e-commerce site and an online financial services platform. Bahl said Snapdeal's objective is to add a number of related offerings around its core platform.
He said this is similar to what Chinese e-commerce major Alibaba has been doing and noted that its recharge business Tmall does $20 billion in revenue. Snapdeal, which raised over $1.1 billion last year, is backed by Japanese telecom and internet major SoftBank Corp, which is also a major stakeholder in Alibaba.
FreeCharge, founded by entrepreneur Kunal Shah, will remain an independent entity for now, and Shah will be CEO. The current CEO, Alok Goel, will be given a separate responsibility in Snapdeal. FreeCharge, which started in Mumbai but which subsequently moved base to Bengaluru to tap technology talent, nets its revenue equally from telecom carriers, brands and from paying customers. Sequoia, a major investor in FreeCharge, is said to be getting a 3% shareholding in Snapdeal following the deal. FreeCharge's early employees are said to have made good money from their stock options.
India has more than 300 million internet users and the Indian ecommerce market is expected to grow to $102 billion by 2020, according to a report by investment firm Morgan Stanley. Snapdeal, Flipkart and Amazon are robustly competing for larger shares in this market, and each has received massive amounts of funding. Flipkart raised close to $2 billion last year, Amazon last year announced a $2 billion commitment towards the expansion of its Indian arm.
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