2017 seems like a year of consolidations. With Flipkart and Snapdeal exploring the final terms of a merger, it is now reported that Paytm has signed a non-exclusive term sheet to acquire Jasper Infotech owned FreeCharge.
Last month, it was reported that ecommerce and payments company Paytm was in talks with Japan-based SoftBank to raise about $1.5 Bn in a cash deal. As part of the deal, the Alibaba-backed mcommerce platform was also looking to acquire FreeCharge. As per the new report, it seems Softbank’s attempts to consolidate Jasper holdings with rivals may materialise soon.
The report further suggests that Paytm will start the financial and commercial due diligence of FreeCharge, next week. The publication has pegged the deal to be estimated between $45 Mn – $90 Mn. If the due diligence process goes smoothly, the deal may be finalised in a month’s time, as per a source close to the development.
However, the proposed deal value of $45 Mn to $90 Mn will be a steep downfall in FreeCharge’s valuation of $450 Mn in 2015, at the time of sale to Snapdeal. The fall in valuation could be a result of its parent company’s current state. Snapdeal went from claims of attaining profitability in two years to a cost-cutting organisation ready for acquisition, in less than a quarter. Just yesterday, Softbank reported a $ 1.4 Bn loss on two major investments in India, Snapdeal and Ola. This is the third consecutive markdown by Softbank.
What’s Up With FreeCharge?
Paytm is the frontrunner for buying FreeCharge. It currently claims to have a user base of 200 Mn. In March 2017, Inc42 reported on Alibaba leading a massive $200 Mn round in Paytm’s recently formed ecommerce unit. In February 2017, Paytm launched Paytm Mall, a consumer shopping app inspired by China’s TMall. In February 2017, Paytm CEO Vijay Shekhar Sharma posted on the Facebook Page that Paytm, having crossed 20 Cr customers, is aiming to reach to 50 Cr Indians by 2020.
The fact that Paytm has signed a ‘non-exclusive’ agreement, gives Snapdeal the freedom to pitch to other players as well and explore more options.