Axis Bank to buy FreeCharge from Snapdeal for Rs 385 crore

NEW DELHI: Axis Bank, India's seventh-biggest lender by assets, on Thursday announced that it has agreed to buy mobile payments wallet provider

FreeCharge

from e-commerce company Snapdeal for Rs 385 crore ($60.04 million).

"Digital payments in India are surging. Government policies are driving a less-cash economy," Axis Bank finance chief Jairam Sridharan told a news conference after announcing the deal. He said the acquisition will double the customer base of the bank and leapfrog its digital journey by multiple years. Axis Bank expects regulatory clearances to the deal in two months. Following this, the bank could consider merging their wallet businesses.

The cut-price deal marks a significant erosion of value for FreeCharge which was acquired for $400 million or Rs 2,500 crore (at current exchange rate). back in 2015 by the Gurgaon-based online marketplace to shore up its online payments play. At the time, it was touted as the largest deal in the then nascent start-up ecosystem in India.

The current transaction will offer significant legroom to the Snapdeal management which has struggled to raise funds for over a year. FreeCharge had also held talks with several industry players for an acquisition or financial investment. It had also signed a non-binding agreement with the Alibaba-backed Paytm but the price being offered of $10 million post the due diligence was not taken up by Snapdeal's parent Jasper infotech.

Sources told TOI that Amazon had in fact placed a higher bid for FreeCharge, however the Snapdeal-owned payments platform opted for the Axis Bank offer. For Axis Bank, the acquisition will give it a good chance to have a strong play in the consumer focussed digital payments space.

FreeCharge, much like Snapdeal, has been in a free fall since late last year as the company was unable to keep up with rivals like the cash rich Paytm. FreeCharge was clocking about 1-1.5 million transactions daily before demonetisation kicked in last year only second to Paytm. While all other payments platforms benefited from the demonetisation drive, FreeCharge lost market share resulting in lower number of daily transactions. By this time, Snapdeal had started tightening its purse strings which restricted FreeCharge's growth further.

But for Axis Bank, FreeCharge could turn out to be a value add given most traditional banks have not been able to become prime players in the mobile wallets segment.

After FreeCharge's CEO Govind Rajan quit earlier this year, the former realty portal Housing.com CEO Jason Kothari was named as the chief executive of the mobile payments firm. Kothari had joined Snapdeal as its chief strategy and investment officer before moving to FreeCharge.

(With agency inputs)

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