It’s a match made in virtual paradise – e-commerce giant Snapdeal has charged-up it business model with the acquisition of online recharge platform FreeCharge in a deal worth around $400 million in cash and stock options. Kunal Bahl, cofounder and CEO of Snapdeal told ET who first reported news of the impending deal on 12th March, “this (acquisition) improves our ability to acquire users at a significant velocity at a very low cost.”
Snapdeal recently raised $1 billion funding from major corporations including $627 million from Japan’s SoftBank to aggressively chase growth. The FreeCharge acquisition is the latest in the string of purchases that Snapdeal has made in a bid to consolidate its position in the mobile commerce space behind the leaders – Flipkart and Amazon. Sequoia Capital which has been investing in FreeCharge has also made its entry into the online retail sector through this deal.
A Dil-ki-Deal indeed!
— Snapdeal.com (@snapdeal) April 8, 2015
In what is considered the biggest buyout in the internet consumer marketplace, Snapdeal will have access to FreeCharge’s 10 million customers, most of whom are younger – 18 to 25 years – than Snapdeal’s (25 to 35 years). This deal will allow cross-sellling of services across both platforms widening the base of potential customers while also making them India’s largest mobile commerce company. For Snapdeal, each customer who uses the FreeCharge platform for recharges is a potential customer for their products. As Bahl believes, “with this game-changing partnership with FreeCharge, we have significantly enhanced our user base and now offer all our customers access to the widest selection of products and services online, making digital commerce an even more intrinsic part of their lives.”
Snapdeal’s tweet announcing the acquisition:
— Snapdeal.com (@snapdeal) April 9, 2015
Chinese e-commerce giant Alibaba made a similar acquisition of Tmall Global which makes mobile recharge sales worth $20 billion annually and has been the inspiration behind Snapdeal’s founders acquiring FreeCharge.
Why this deal makes commercial sense?
- Deloitte estimates India’s m-commerce based transactions will increase in value from Rs. 7800 cr to Rs. 36000 cr. between FY13 & FY14.
- Investment firm Morgan Stanley expects the Indian e-commerce market to increase to $102 billion by 2020.
- Favourable conditions like the ease of mobile number portability, FDI in telecom, decreasing data rates and the expected widespread migration to 3G will lead to tremendous growth in mobile users creating a potentially huge m-commerce market base.
The Snapdeal-FreeCharge combine is uniquely place to leverage these expectations and developments in the internet driven marketplace. Kunal Shah, Co-Founder & CEO, FreeCharge views the matchup positively, “the partnership with Snapdeal comes at the right time, I foresee this as an opportunity to accelerate our road map in India and reach out to millions of users across the country.”
Following the acquisition, FreeCharge will continue to operate as an independent platform. Their 200 employees will join the 5000 plus Snapdeal employee base and both are looking forward to working with each other as this video reveals: