Our doubts about the future of FreeCharge might soon end with the Snapdeal-owned digital payments behemoth finding a new home at PayPal. And this could initiate a much larger global push for the payments ecosystem of India.
Citing three people aware of the developments, ET reports that Snapdeal has initiated talks with U.S-based global payments company PayPal to sell FreeCharge. The transaction is expected to value the Indian payments startup at close to $500 million, higher than the $400 million Snapdeal paid to acquire it in 2015. Talking about the rumored transaction, one of the source says,
This will free up to a great deal Snapdeal’s desperate need for funds at a time when investors are not willing to put money into its business.
This development comes on the heels of the massive consolidation exercise, which led 600 employees to depart and co-founder giving up their compensations, carried out at Snapdeal just recently. The homegrown e-commerce giant is faced with an intense cash crunch and is now adopting a leaner and agile business model to reactivate growth. It has taken the said steps to minimize their cash burn and look forward to achieving profitability in the next two years, according to CEO Kunal Bahl. Speaking on the same, he had said,
I see a relatively clear line of sight to profit and we have been making great progress in that direction also. We needed capital to build the infrastructure which we have, now we have to take control of our destiny.
Further, much like its parent, Snapdeal-owned FreeCharge has recently also witnessed an exodus at senior management levels. The latest blow came in the form of chief executive Govind Rajan, who parted ways with the company post a mere nine-month stint. His responsibilities have now been handed over to Snapdeal’s most recent executive addition — former Housing CEO Jason Kothari. He will now oversee the overall development of FreeCharge’s 192 million users strong wallet service.
However, this is not the first time we’re hearing about a deal being worked out between FreeCharge and PayPal. We earlier reported that PayPal was looking to acquire a 25 percent minority stake in the company. This proposition seemed quite plausible at that time because PayPal had been involved in a spat over a trademark infringement claim with Paytm. Thus, investing in its fiercest rival was their only option to make a push into the India’s ripe payments ecosystem. The rumors were however debunked in a couple days and so could be the case with today’s speculations as well.
We’ve contacted both FreeCharge and PayPal to learn more about the rumored transaction and will update you once we hear back from either of them.