MobiKwik-Freecharge deal to herald new era for wallets
One of the biggest architects of the consolidation drive underway is Japanese conglomerate SoftBank. It is orchestrating mergers not just in the e-commerce space, but also for digital wallets. As it tries to convince Nexus Venture Partners to give its nod to the Snapdeal-Flipkart merger, SoftBank is on the side fixing a deal with MobiKwik to sell Freecharge, the digital wallet acquired by Snapdeal in 2015.
If last year was marked by shutdowns, losses and layoffs in the e-commerce sector, this could well be the year when others too were caught in the slowdown.
After online marketplaces, it now seems to be the turn of financial technology start-ups to either shut shop or sell themselves.
One of the biggest architects of the consolidation drive under way is Japanese conglomerate Softbank. It is orchestrating mergers not just in the e-commerce space, but also for digital wallets.
As it tries to convince Nexus Venture Partners to give its nod to the Snapdeal-Flipkart merger, Softbank is on the side fixing a deal with MobiKwik to sell Freecharge, the digital wallet acquired by Snapdeal in 2015.
Freecharge, which till last year was touted as the second largest wallet player in India after Paytm, today is valued at one-tenth of the price Snapdeal paid for it, which was roughly $400 million.
Freecharge has been on the block for some time. According to informed sources, Jason Kothari, who was recently appointed as chief executive officer of Freecharge, is in talks with investors from the US and China in an effort to sell it. PayPal was initially interested in making a sizeable investment in Freecharge, but the deal could not be closed.
Kothari was brought into real estate portal Housing.com by Softbank, which held a stake in the firm, after the unceremonious exit of CEO Rahul Yadav. After Housing was sold to another portal, PropTiger, Kothari joined Snapdeal in January this year as chief strategy and investment officer. In March, he was also given charge of Freecharge as its CEO and board member.
Freecharge, according to sources, has been in talks with Paytm, PayU and Flipkart for a possible stake sale. The deal with MobiKwik, if it goes through, along with Flipkart’s acquisition of Snapdeal, will help Softbank exit Snapdeal fully. In the last six months, Softbank has been working towards the biggest consolidation in the Indian e-commerce segment and is trying to hedge its bets with plans to buy stakes in both Tiger Global-backed Flipkart as well as Alibaba’s lead investment in India, Paytm.
Experts believe at present the main concern of the Japanese investor is to cut its losses on investments in Snapdeal. The company has invested close to $900 million in the e-commerce start-up.
“By hedging its bets in Paytm and Flipkart, Softbank is trying to ensure that it is able to exit from one of these investments at a later stage at a premium. Since Paytm is backed by Alibaba, which is Softbank’s crown jewel, it is more likely to exit Flipkart when it goes in for an IPO,” said an analyst with an international consultancy firm.
Mobikwik, on the other hand, is set to gain from the merger with Freecharge. The deal will lend it scale and help it to become a bigger player in the mobile wallet space after inheriting Freecharge’s merchants, which include Amul, IRCTC, Uber, Meru Cabs, Big Bazaar, OYO Rooms, BookMyShow, Big Basket, MakeMyTrip and a host of other offline players.
MobiKwik will also gain Freecharge’s customer base to become the second largest player in the market after Paytm with 75-80 million users. At present, Mobikwik has around 50 million users.
The merger will make MobiKwik more lucrative for investors. MobiKwik has for some time been trying to raise funds. It has been on a major expansion drive and has opened 13 new offices, recruiting over 1,000 employees.
The company is keen to project itself as a serious entity in the financial technology space to investors. Co-founder Upasana Taku and founder-CEO Bipin Preet Singh have been meeting investors in the US and elsewhere to raise new rounds of funding.
It recently said that it planned to invest ~300 crore in office expansion, technology and marketing. It has also set a goal to increase its user base to 150 million within a year. This increase will push its annual gross merchandise value to $10 billion from the current $2 billion.