Snapdeal, the Softbank backed eCommerce giant is reportedly approaching multiple investors in an attempt to raise money for FreeCharge, the company’s very own digital wallet. Interestingly, the company appears to be quite keen upon Chinese firms and sovereign funds, in it’s latest bid to raise capital.
The interest is mutual it seems, and as per Snapdeal CEO Kunal Bahl, Freecharge is attracting quite a bit of investor attention on its own.
We are getting a lot of interest from sovereign funds and some Chinese investors. Chinese investors have seen the Alipay story. They have seen that Alipay has been successful because it is attached to a large commerce platform.
The Alipay analogy is a pretty good one. Alipay, in case you are unfamiliar with it, is a third-party online payment platform with no transaction fees. It was launched in China in 2004 by Alibaba Group and its founder Jack Ma and as per analysts, had the biggest market share in China with over 300 million users and control of almost half of China’s online payment market in early 2014.
The company has since then, grown its user base to over 450 million and raised a stunning $4.5 billion at an estimated valuation of $60 billion in April. Rumours of an impending IPO for the payment provider are also on the cards.
FreeCharge, of course, has comparatively humbler credentials and statistics at present, although it certainly hopes to emulate Alipay in the future. The company was brought to centerstage, when it was acquired by Snapdeal parent Jasper Infotech in April last year in an estimated $400-450 million cash and stock deal.
The payment service has since then, been closely integrated with Snapdeal and can be used to pay for purchases of goods on Snapdeal. It can be also used to purchase a range of services — such as travel-booking and food-ordering — that Snapdeal recently introduced to its platform.
FreeCharge also lets users pay their way through Prepaid mobile phone recharges, Data card recharge, DTH recharge, Postpaid bills, Gas Bill Payment, Electricity Bill Payment, Metro Smart Card Recharge, Landline Bill Payment and other utility transaction.
So yes, the service is growing fast and it is easy to see Snapdeal — or even Jasper Infotech — closely integrating it with the rest of their ecosystem before pushing it out to challenge Paytm — currently the country’s most popular payment service. The company still has
The company still has a long way to go and handles only about 30-31 million transactions every month as compared to PayTm’s monthly, 95 million or so transactions. So yes, there is a long way to go and a river of money pouring in from investors, would certainly help narrow the gap.
However, Bahl is adamant upon not undervaluing FreeCharge in the company’s bid to raise investments for it.
I have told investors, ‘If you want to come into our crown jewel, it is going to be at a price. If you are not willing to pay that price today, no problem. Let’s wait for three to six months and let (Free-Charge) continue to execute. Till then, we will finance it.
However, he declined to put a clear number to the valuation being sought from investors while raising money for Freecharge, although it is certain to be significantly higher than the half-billion dollars FreeCharge was initially bought for.
Meanwhile, the Snapdeal CEO also reiterated his company’s opinion — and also of the ecommerce community in India in general — with regards to online payments system.
FreeCharge is not a three-year journey. It’s a commitment of a lifetime for us that we have made to the company and to the business. If we are running Snapdeal for 25 years, we have to run FreeCharge for 25 years also, and hence we want high-quality strategic investors for them as well.
And China ofcourse, is the perfect destination when you have high-quality strategic investors in mind.
Meanwhile, Snapdeal is not alone in the importance it is giving to the matter of an in-house payment platform. Flipkart also recently launched a mobile wallet called Flipkart Money. The major advantage of having an in-house system is that not only does such a system provide a closer integrations with sales, it can also save significant costs related to product returns.