In a bid to compete with Paytm, a mobile payment and commerce platform, Snapdeal is trying to raise funds for Freecharge at an undisclosed valuation. Snapdeal had acquired Freecharge in April last year for $400 Mn in a cash and stock deal.
The company is reportedly looking to raise about $300 Mn for Freecharge.
As said, Chinese firms and sovereign funds are showing investment interests to gain outsized returns.
“I have told investors, ‘If you want to come into our crown jewel, it is going to be at a price’,” said Kunal Bahl, CEO, Snapdeal. “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.”
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Alibaba, a Chinese ecommerce company is already working with this model and earning revenues in billions with its recharge business Tmall. “They have seen that Alipay has been successful because it is attached to a large commerce platform,” said Bahl. Alipay, a third party online payment platform, was launched by Alibaba in 2004 and it currently has 450 Mn active users. It raised $4.5 Bn in April and is planning for an IPO soon.
The founders believe that this strategy would clearly differentiate them and would give an edge over the rivals Flipkart and Amazon.
As a part of its expansion strategy, recently Snapdeal has tied up with startups such as Zomato, Cleartrip, UrbanClap, and redBus to launch their services on its mobile application. Also, it has introduced real estate and financial services and will soon be adding vehicle insurance and financing services on the website. FreeCharge can be used as payment mode for any purchase on Snapdeal as well as for buying services offered by added entities.
As far as competition is concerned, apart from Paytm, Flipkart and Amazon are also working to strengthen their digital payment platforms – Flipkart Money and Pay with Amazon in India, respectively. Also, on Wednesday, Reliance Jio Infocomm launched its digital wallet JioMoney Wallet. The platform has reportedly signed up more than 50,000 online merchants for the wallet service.
Also, Financial institutions and lifestyle shops are coming up with their own wallet, as can be seen with the launch of SBI Buddy, ICICI Pocket and even BookmyShow’s own wallet. Also, Google and Apple are all set to launch their services in India, per reports.
Mobile wallets have acquired the term ‘mini accounts’ for people, which they can use for varied purposes. As per industry estimates, mobile payments in India are estimated to grow from $86 Mn in 2011 to $1.15 Bn in 2016, with a compounded annual growth rate (CAGR) of 68 per cent.
Although, millions are getting poured into digital payments segment, the success of these portals still poses a question mark. The shutdown of Payzippy, a payment vertical by Flipkart is examplarery for this. Will this strategy of companies to attract consumers work in future? Or Is this a starting to another war between high profile players with deep pockets?