Snapdeal - Freecharge

Acquisition
ANKITHA KURIAKOSE
MBA
ROLL NO : B2253
About Snapdeal
• Snapdeal is an Indian e-commerce company based in New Delhi, India

• Started in February 2010

• More than 300,000 sellers and millions of users

• Over 60 million products across 800+ diverse categories from over 125,000
regional, national, and international brands and retailers

• A reach of 6,000 towns and cities across the country

• Has partnered with several global investors and individuals such as SoftBank,
BlackRock, Foxconn, Alibaba, eBay Inc., Intel Capital, Mr. Ratan Tata, among
others.
About Freecharge

• FreeCharge is an e-commerce website headquartered in Gurgaon, Haryana

• Started in August, 2010

• Provides online facility to recharge any prepaid mobile phone, postpaid

mobile, DTH & Data Cards in India

• The amount paid by the user for recharge is returned in form of shopping
coupons of some of the top retailers in India, thereby making the recharge
virtually free

• Number of registered users - 2.8 million

The Acquisition
• On 8 April 2015, Snapdeal had acquired online recharge platform FreeCharge
for an estimated $400 million (Rs 2,400 Crore), making it one of the largest deals
in the consumer internet space in India

• The deal happened to be 30% in cash and 70% in stock

• The companies collaborated to offer a seamless shopping experience to

customers across both the platforms offering an even wider range of products
and services

• FreeCharge continued to function as an independent platform and all aspects

of FreeCharge’s shopping experience remained intact
Reasons for Acquisition
• The joint entity created the country's largest mobile commerce platform with
over 40 million customers. About half of that comes from FreeCharge

• FreeCharge gave 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, 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

• Cross-sell services on each other’s platforms

• Snapdeal’s objective was to add a number of related offerings around its core
platform (Alibaba’s model).
• Huge opportunity - only about 3 million — of the total 75 million mobile
recharges were being done online

• Unlike any other country, e-commerce in India - fuelled by mobile phones

instead of computers

• The scope to strengthen the daily transaction rate (>1 million transactions daily)

• While Snapdeal received over 70% of its orders from tier-2 cities and beyond,
FreeCharge received less than 30% orders from these geographies. Now,
Snapdeal, with deep rooted networks in non-metros, can take Freecharge and
unlock the value potential waiting to be tapped there.

• The valuation of Snapdeal getting a boost for its next round of funding. For
investors, the customer base and daily transaction rates are key parameters
when they evaluate a company.
Sale of Freecharge to Axis Bank
• After nearly a year of searching for a buyer, Snapdeal in July,2017 agreed to
sell its payment wallet Freecharge to Axis Bank for Rs 385 crore, almost 90 per
cent lower than what it had paid for the firm in 2015

• FreeCharge failed to make waves for the company, as Paytm continued to

be the leader in digital payments and FreeCharge failed to gain advantage
from demonetisation like Paytm

• The FreeCharge sale was an important part of Snapdeal 2.0 as that capital
was crucial for the survival of the company

• To call off Flipkart-Snapdeal merger in August,2017

• Main reason for failure of Snapdeal-Freecharge merger : Lost its chance to be

on the same page with its rivals Flipkart and Amazon India — who own their
own digital payment app PhonePe and Amazon Pay, respectively — at a
time when the Indian fintech sector was witnessing a formative growth with
more startups and investments emerging in the market
Comeback
• In August 2017, the founders had apparently envisioned Snapdeal 2.0 to
make a gross profit of $23.3 Mn (INR 150 Cr) in the next 12 months

• During the period of September 1, 2017, till October 20, 2017, Snapdeal not
only increased its sales but also increased its net margin by six-fold as
compared to the festive season in 2016

• Further, in its FY17 financials ending in March 2017, Snapdeal claimed to have
reduced its fulfillment cost by 20% and operational losses by nearly 25%

• Turned cash-flow positive in the month of June 2018

Thank You…