May 11, 2016: Snapdeal, an online marketplace is in talks with multiple investors including Chinese firms and sovereign funds to raise money for FreeCharge, seeking to bulk up its digital payments platform before pitting it against market leader Paytm.
Operating for Snapdeal, Jasper Infotech is positioning FreeCharge as a cornerstone of its business as it builds a comprehensive online ecosystem of goods and services similar to that created by Alibaba Group, a Chinese ecommerce giant. The strategy, it expects, will make the electronic marketplace stand out from its closest rivals Flipkart and Amazon.
“We are getting a lot of interest from sovereign funds and some Chinese investors,” Snapdeal CEO Kunal Bahl told ET. “Chinese investors have seen the Alipay story.”
“They have seen that Alipay has be- Q&A en successful because it is attached to a large commerce platform,” said Bal.
According to reports, Snapdeal, which is backed by Japan’s SoftBank and China’s Foxconn, was in talks with existing and new investors to raise about $300 million (Rs 2,000 crore) to strengthen FreeCharge.
Bahl declined to disclose the valuation he is seeking for FreeCharge or the status of the fundraising. Jasper Infotech acquired FreeCharge in April last year for an estimated $400-450 million in cash and stock.
Payment for purchases of goods on Snapdeal as well as a range of services such as travel-booking and food-ordering can be done through FreeCharge that the online marketplace recently included on its mobile application through tieups with other firms.
“I have told investors, ‘If you want to come into our crown jewel, it is going to be at a price’,” Bahl said. “If you are not willing to pay that price today, no problem. Let’s wait for three to six months and let (Free-Charge) continue to execute. Till then, we will finance it.”
Alipay raised $4.5 billion at an estimated valuation of $60 billion in April and, according to a Bloomberg report, is planning an initial public offering of its shares. The company, controlled by Alibaba Group founder Jack Ma, has about 450 million active users.
Possessing details of over 20 million credit and debit cards stored on its platform and 30 million verified addresses, FreeCharge is targeting transactions worth Rs 20,000 crore by the end of March 2017, more than a threefold increase from about Rs 6,600 crore in January 2016.
Paytm backed by Alibaba Group, which was valued at $3.4 billion as of September, had 128 million registered wallet users and handled about 95 million transactions a month as of January, much higher than the 30-31 million transactions FreeCharge handles every month.
India’s largest ecommerce firms are sharpening their focus on digital payment platforms to have greater control over transactions. Flipkart, the country’s biggest online marketplace, in March launched a mobile wallet called Flipkart Money, which it expects will help it save significant costs related to product returns in addition to offering users an in-house payments option.
Snapdeal’s latest fundraise for FreeCharge is a departure from its earlier capital-raising rounds that were focused on funding overall growth.
“FreeCharge is not a three-year journey. It’s a commitment of a lifetime for us that we have made to the company and to the business,” Bahl said. “If we are running Snapdeal for 25 years, we have to run FreeCharge for 25 years also, and hence we want high-quality strategic investors for them as well.”
Chinese investors are increasingly looking to invest in Indian firms as they seek to replicate the outsized returns they earned from backing domestic consumer internet ventures such Alibaba Group. Indian companies are cognizant of this.
Snapdeal in February brought on board technology-focused venture capital firm Iron Pillar, which is an adviser to Singapore-based investment firm Brother Fortune Apparel Pte Ltd that represents several very wealthy Chinese individuals.