Freecharge, the Snapdeal-owned digital payments company, is reportedly in final stages to sell a minority stake to perhaps the most known name in digital payments globally, PayPal. Based on two people aware of the matter, LiveMint reports that the company could sell around 25 percent stake for about $200 million in a deal, which could result in Paypal making an official push into the hugely ripe Indian digital payments sector.
A person aware of the development said that the offer will be discussed by the board members of Jasper Infotech, the parent company of Snapdeal which owns and operates Freecharge. The discussion is likely to take place in the first week of January. The source further says,
PayPal’s initial offer was for a controlling 51% stake in Freecharge. But SoftBank, which is the largest shareholder in Snapdeal, is not keen to divest a majority stake and may sell between 20-25% in Freecharge, although a final decision is pending.
As per the report, PayPal is said to have hired Goldman Sachs as an adviser while Deutsche Bank is advising Jasper Infotech in this transaction. The people aware of the matter suggest that Jasper Infotech founder Kunal Bahl and Snapdeal’s head of M&A Abhishek Kumar are leading the deal.
This is the most opportune time for a global digital payments brand like Paypal, to make an India entry. Demonetisation has literally compelled people to switch to cashless transactions, resulting in massive usage rise for cashless payments services, specially Paytm. The market opportunity is worth billions and still largely unexplored, hence the move by Paypal. Also, PayPal has recently filed a trademark infringement lawsuit against Paytm and claimed the latter was using a logo and colour scheme similar to its own, thus clearing how serious it was with its India business.
While this report from LiveMint suggest the minority acquisition of Freecharge by PayPal, ET reported in October that SoftBank was in talks to invest up to $150-200 million in Freecharge along with other investors, valuing the company at around $900 million to $1 billion.
The company is keen to consider PayPal’s offer given that it comes with global experience and know-how of the industry. A source said that few more investors are ready to back Freecharge but Snapdeal’s board is keen on PayPal.
Freecharge was founded in August 2010 by Kunal Shah and Sandeep Tandon and secured funding from many investors, including Sequoia Capital, Tybourne Capital Management and San Francisco-based fund Valiant Capital Management. In April last year, Freecharge was acquired by Snapdeal for around $450 million.