MERGER OF SNAPDEAL WITH FREE CHARGE

About Snapdeal:
Snapdeal is an online market place, New, India. The company was started by,
a Wharton graduate as part of the dual degree M&T Engineering and Business
program at Penn, and Rohit Bansal, an alumnus of IIT Delhi in February 2010.
Snapdeal was started in February 2010 as a daily deals platform but expanded in
September 2011 to become an online marketplace. Snapdeal has grown to become
one of the largest online market place in India. Offering an assortment of 10
million products across diverse categories from over 100,000 sellers, shipping to
5,000 plus towns and cities in India. In March 2015, Snapdeal brought actor Aamir
Khan for the promotion of its website in India.

Funding
Snapdeal has received 7 rounds of funding:

Round 1: In January 2011, Snapdeal received a funding of $12 million from

Nexus Venture Partners and Indo-US Venture Partners.

Round 2: In July 2011, the company raised a further $45 million

from Bessemer Venture Partners, along with existing investors Nexus Venture
Partners and Indo-US Venture Partners.

Round 3: Snapdeal then raised a 3rd round of funding worth $50 million
from eBay and received participation from existing investors i.e. Bessemer
Venture Partners, Nexus Venture and Indo US Venture Partners.

Round 4: Snapdeal received its 4th round of funding of $133 million on Feb2014. The 4th round of funding was led by eBay with all the current
institutional

investors,

including

Kalaari

Capital,

Nexus

Venture

Partners, Bessemer Venture Partners, Intel Capital and Saama Capital all
participating.

Round 5: Snapdeal received its 5th round of funding of $105 million in

May-2014. The 5th round included investments by Blackrock, Temasek
Holdings,

PremjiInvest

and

others. The

round

valued

SnapDeal

at

$1,000,000,000.

Round 6: Snapdeal received its 6th round of funding in Oct-2014

from Softbank with investments worth $627 million in fresh capital. This
makes Softbank the largest investor in Snapdeal.

Round 7: Snapdeal received its 7th round of funding in Aug-2015

from Alibaba Group, Foxconn and Softbank with investments worth $500
million in fresh capital.

Acquisitions

In June 2011, Snapdeal acquired Bangalore-based group buying site,

Grabbon.com.

In April 2012, Snapdeal acquired esportsbuy.com, an online sports goods

retailer based out of Delhi.

In May 2013, Snapdeal acquired Shopo.in, an online marketplace for Indian

handicraft products.

In April 2014, Snapdeal acquired fashion products discovery site,

Doozton.com.

In December 2014, Snapdeal acquired gifting recommendation site,

Wishpicker.com.

In January 2015, Snapdeal acquired a stake in product comparison website

Smartprix.com.

In February 2015, Snapdeal acquired luxury fashion products discovery

site, exclusively. In.

In March 2015, Snapdeal acquired 20% stake in Gojavas.com.

In March 2015, Snapdeal acquired ecommerce management software and

fulfillment solution provider, Unicommerce.com

In March 2015, Snapdeal entered into the financial services marketplace by

acquiring a majority stake of Rupee Power which provides a digital platform
for financial products to customers. Mr. Tejasvi Mohan ram, the founder of
Rupee Power would continue to be the MD&CEO of the company.

In

April

2015,

Snapdeal

acquired

mobile-payments

company

FreeCharge.com.

In September 2015, Snapdeal acquired Reduce Data, a programmatic display

advertising platform.

About Free Charge

FreeCharge.in is an e-commerce website headquartered in Mumbai, Maharashtra.
It provides online facility to recharge any prepaid mobile phone, postpaid
mobile, DTH & Data Cards in India. On 8 April 2015, Snapdeal acquired
Freecharge what is being referred as the biggest takeover in Indian e-commerce
sector so far. According to The Economic Times, the deal is expected to be
anything around US$400 to 450 million. FreeCharge was started in August, 2010
by Kunal Shah and Sandeep Tandon. After getting seed funding of an undisclosed
amount from Tandon Group and Sequoia Capital in 2010, the company
secured Series A funding of INR 200 million from Sequoia Capital in 2011. In
November 2012, the company claimed to be doing online recharge of INR
6 million on a daily basis, translating to INR 2.19 billion a year.
In 2011, FreeCharge was named one of the most promising technology
startups from India by Pluggd.in.
On 1 September 2014 Freecharge received $33Million Series B Funding from
Sequoia Capital, Sofina and Ru-Net. One of the biggest fund raising by an Indian
Technology Startup. FreeCharge is building an advertising platform that will
capture online and offline purchase behavior and brand preferences of consumers,
by offering incentives and discount coupons to users to transact on its platform.

On 8 April 2015 Indian e-commerce Snapdeal acquired Freecharge for Rs.2800

crore.

Marketing
Social media is the primary platform used to reach out to new customers. Rather
than relying on direct advertising, the company focuses on unconventional
advertising to reach out to customers. In May 2013, the company in association
with TheViralFever.com (TVF), an online youth entertainment network, launched a
video on YouTube which was aspoof of Emotional Atyachar, a TV show. The name
of the company was not directly mentioned so that the video does not look like an
advertisement.The company has launched campus marketing program by the name
of "FreeCharge Campus Rockstars" to directly reach out to students in campuses
of IITs and IIMs.
In March 2013, FreeCharge tied-up with production houses Sony Pictures, Yash
Raj Films, UTV Motion Pictures and Viacom 18 to promote their upcoming
movies through its portal. Consequently, FreeCharge was the recharge partner of
the

movies

released

by

these

houses

such

as Man

of

Steel, Django

Unchained, Mere Dad Ki Maruti and Bhaag Milkha Bhaag. Freecharge is the
principal sponsors of Delhi Dynamos FC which plays in the Indian Super League.

Reasons Snapdeal Acquired Freecharge

Even if you are living in a cave, this news must have reached you: Snapdeal
acquired Freecharge for an undisclosed sum; speculations are rife that the deal is
in the range of $400-450 million, with stock and equity transfers.
Last year in February, I attended an IAMAI event where Freecharge founder Kunal
Shah was a panelist for a discussion regarding entrepreneurship. He had shared the
challenges of building a startup and how they acquired their first 50,000 customers.
For instance, they met McDonalds management atleast 35 times before they said
yes to their proposal of free coupons based on mobile recharges.
Today, after this acquisition which has been termed as one of the biggest Indian
ecommerce has ever seen, SnapDeal and Freecharge together have a 40 million+
customers and total of 30 million+ application downloads. Freecharge app
alone has 10 million downloads. 1 million + daily transactions would now be
handled by both of them.

This acquisition has successfully overtaken Flipkarts acquisition of Myntra which

was in the range of $350 million.
Here are three biggest reasons, based on inputs from industry watchers and
Ecommerce veterans, which prompted an ecommerce marketplace to shell out
close to half a billion dollars to acquire a mobile recharge company:

Mobile is the Future

In this acquisition, mobile is the most important factor.
If we try to analyze the difference between dotcom bust of 2000 and the current
hyper inflated valuations of Internet companies, then we will find that mobile is the
differentiator. In fact, such is the vehemence of the new mobile centric approach
that Myntra has recently closed their desktop version and users can now only
purchase from their mobile app! And skeptics are terming that this is not a fad
which will die down; in fact usage of mobile internet is increasing at an break neck
speed, and slowly almost everything would be only sold via mobiles.

In 2013, we had reported that 30% of all orders on Snapdeal originate from mobile,
which increased to 60% in 2014. And as per their projections, in the next 3 years,
90% of all their orders will come only from mobile apps.
Now, lets examine Freecharges business model: they enable users to recharge
their mobiles and get coupons in exchange. Considering that 100% of
Freecharges customers are only mobile oriented, this is the best decision Snapdeal
could have made. In fact, for any ecommerce company which is looking to dig
deep into the mobile centric customers, Freecharge would have been the best
choice.
In coming days, we can observe lots of more such acquisitions wherein ecommerce
portals may acquire mobile based services.

New Customers from Tier 2 & Tier 3 Cities:

70% of all orders on Snapdeal originate from Tier 2 & Tier 3 cities, whereas only
30% of orders on Freecharge originate from these cities. If we observe this fact
from the point of view of Freecharge, then getting acquired by Snapdeal made the
most sense.
If Snapdeal will get benefited from Freecharges mobile only customers, then
Freecharge will also get benefitted from Snapdeals Tier 2 & Tier 3 customers who

are ordering products from mobile but have never used Freecharges platform for
mobile recharges.
Freecharge can now get a big volume of new customers from these cities, who are
not even aware of such excellent service. Now, how shall Freecharge compensate
them with coupons is another factor all together. Maybe rural based new marketing
approach would be implemented. But the point is, Freecharge will now have lots of
new customers. It is estimated that 75 million mobile recharges are done every 24
hours in India, out of which only 3 million are done online.
Freecharge has positioned them right on track to tap this market.

Market Consolidation in eCommerce + mCommerce:

Snapdeal is Indias third biggest ecommerce portal after Flipkart and Amazon.
While Flipkart is backed by Tiger Global and Naspers and other biggies, Amazon
India is self-financed from Amazon headquarters in USA. This left Snapdeal to
scout for investors who can fund them and believe them. Last year, they found
their big ticket investor when SoftBank infused $627 million into Snapdeal, taking
its valuation more than $2 billion. Few months later, Alibaba, based by Softbank
invested $575 million into PayTm, which was Indias biggest mCommerce portal
before Snapdeal-Freecharge deal. Hence, if we speak of mobile commerce

landscape, then the Softbank holds the reins of Snapdeal, PayTm and
Freecharge. And this proves that market consolidation is in full swing now, as it
leaves three major players fighting it out for dominance: Flipkart ; Amazon and
Snapdeal. Jabong & eBay remain the dark horses now, which may become crucial
in shifting the pendulum of success between these big three.
Certainly, an exciting time for Indian eCommerce and mCommerce industry in
India. And for Freecharge & Snapdeal, its time for celebration.