Snapdeal has acquired online mobile recharge platform FreeCharge in the largest buyout so far in the Indian consumer Internet sector as it arms itself with fresh ammunition to battle rivals for leadership in the online retail sector. The Delhi-based company did not disclose the financial terms of the transaction, but sources privy to the Rs.2,800 crore details said it paid over ($450 million) in cash and stock.
“We want to target the new tsunami of users who are going to come on to the Internet. This (acquisition) improves our ability to acquire users at a significant velocity at a very low cost,“ said Kunal Bahl, 32, the cofounder and CEO of Snapdeal. Bahl led the negotiations for FreeCharge, which lasted about a month.
“Together we represent the largest mobile commerce company in the country now,“ said Bahl, a Wharton Business School graduate who cofounded Snapdeal with schoolmate Rohit Bansal in 2007.
The company , which began by selling printed coupon booklets has pivoted -or changed its business model -seven times until it hit the right note as an online marketplace. It has since received funding from some of the world's biggest corporations, including eBay and Japan's SoftBank, from which it raised $627 million in October.
The deal also marks the entry of Sequoia Capital -a significant shareholder in FreeCharge and the most prolific investors in India last year -into the online retail sector where rival venture capital firm Accel Partners enjoys a head start because of its early bet on market leader Flipkart.
Freecharge has raised nearly $116 million from investors including San Francisco-based hedge fund Valiant Capital Management, Hong Kongbased hedge fund Tybourne Capital Management, Sequoia Capital, RuNet and Sofina. The Mumbai-based company was founded in 2010 by Kunal Shah and Sandeep Tandon.
For Snapdeal, the merit of the acquisition lies in the fact that FreeCharge comes with a trove of payment data on the estimated 10 million users on its platform. Besides, buyers are transacting on mobile devices in ever greater numbers, meaning that FreeCharge users become potential customers for Snapdeal. Part of Snapdeal's gameplan also involves diversifying beyond products to include services such as education, financial services and utility payments.
Paytm, which now calls itself a mobile marketplace, is backed by Ant Financial Services Group, the online financial services company owned by China's Alibaba group. Snapdeal's recent deal-making has consisted of the acquisition of fashion portal Exclusively.in, investment in logistics firm GoJavas, and the purchase of a majority stake in financial services player RupeePower earlier this year.
Bahl explained the allure of FreeCharge by pointing to Alibaba's online marketplace Tmall, which he said draws one-fifth of its merchandise value from mobile recharges. “So we realised that this category , which is at 2-3 million transactions a day right now, will go to tens of millions of transactions. It's going to drive high frequency customer acquisition and transaction velocity ,“ he said.
Snapdeal is the number three player behind Flipkart and Amazon and was aiming to sell goods worth $3 billion in 2014-15. This deal, Bahl claimed, has the potential to upend the pecking order, and promised that the competition is only going to get more intense. “The (ecommerce) game has changed considerably in the last one year and it is only going to get brutal,“ he said.
“We want to target the new tsunami of users who are going to come on to the Internet. This (acquisition) improves our ability to acquire users at a significant velocity at a very low cost,“ said Kunal Bahl, 32, the cofounder and CEO of Snapdeal. Bahl led the negotiations for FreeCharge, which lasted about a month.
“Together we represent the largest mobile commerce company in the country now,“ said Bahl, a Wharton Business School graduate who cofounded Snapdeal with schoolmate Rohit Bansal in 2007.
The company , which began by selling printed coupon booklets has pivoted -or changed its business model -seven times until it hit the right note as an online marketplace. It has since received funding from some of the world's biggest corporations, including eBay and Japan's SoftBank, from which it raised $627 million in October.
The deal also marks the entry of Sequoia Capital -a significant shareholder in FreeCharge and the most prolific investors in India last year -into the online retail sector where rival venture capital firm Accel Partners enjoys a head start because of its early bet on market leader Flipkart.
Freecharge has raised nearly $116 million from investors including San Francisco-based hedge fund Valiant Capital Management, Hong Kongbased hedge fund Tybourne Capital Management, Sequoia Capital, RuNet and Sofina. The Mumbai-based company was founded in 2010 by Kunal Shah and Sandeep Tandon.
For Snapdeal, the merit of the acquisition lies in the fact that FreeCharge comes with a trove of payment data on the estimated 10 million users on its platform. Besides, buyers are transacting on mobile devices in ever greater numbers, meaning that FreeCharge users become potential customers for Snapdeal. Part of Snapdeal's gameplan also involves diversifying beyond products to include services such as education, financial services and utility payments.
Paytm, which now calls itself a mobile marketplace, is backed by Ant Financial Services Group, the online financial services company owned by China's Alibaba group. Snapdeal's recent deal-making has consisted of the acquisition of fashion portal Exclusively.in, investment in logistics firm GoJavas, and the purchase of a majority stake in financial services player RupeePower earlier this year.
Bahl explained the allure of FreeCharge by pointing to Alibaba's online marketplace Tmall, which he said draws one-fifth of its merchandise value from mobile recharges. “So we realised that this category , which is at 2-3 million transactions a day right now, will go to tens of millions of transactions. It's going to drive high frequency customer acquisition and transaction velocity ,“ he said.
Snapdeal is the number three player behind Flipkart and Amazon and was aiming to sell goods worth $3 billion in 2014-15. This deal, Bahl claimed, has the potential to upend the pecking order, and promised that the competition is only going to get more intense. “The (ecommerce) game has changed considerably in the last one year and it is only going to get brutal,“ he said.
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