Axis Bank likely to acquire Freecharge for up to ₹400 cr
BENGALURU: Axis Bank Ltd is nearing a deal to buy digital payments platform Freecharge for ₹350-400 crore in cash, giving muchneeded breathing space to the latter’s parent Snapdeal, which is separately in talks to sell itself to larger rival Flipkart.
By buying Freecharge, Axis Bank will get a popular digital payments brand as well as access to high-quality technology that traditional companies typically struggle to build compared with internet start-ups.
Axis Bank and Freecharge are likely to announce the deal this week, two people familiar with the matter said on condition of anonymity.
Freecharge had also held lengthy talks with Paytm (One97 Communications Ltd) but chose to go with Axis Bank as the private sector bank offered a higher price, the people said.
Axis Bank and Snapdeal (Jasper Infotech Pvt Ltd) didn’t immediately respond to emails seeking comment.
Axis Bank was represented by the law firm Cyril Amarchand Mangaldas and Freecharge was represented by J Sagar Associates. Neither used an investment bank for the deal.
The sale of Freecharge will mark the most stunning collapse in India’s startup world, even more so than that of its parent company, which has seen its fortunes dip since the start of 2016.
Snapdeal bought Freecharge for $400 million in April 2015 in what was then the largest start-up deal in India.
Last year, Freecharge hit the market to raise funds separately. Until late January, Snapdeal was confident Freecharge would raise fresh capital at a valuation of $700-900 million. But because of differences between board members, Freecharge passed up at least two funding offers.
Since late last year, Snapdeal’s founders and venture capital firms Nexus Venture Partners and Kalaari Capital have been locked in a boardroom battle that has resulted in Snapdeal and Freecharge passing up funding deals, cutting jobs and being forced to seek buyers.
SoftBank Group Corp, the biggest investor in Snapdeal, disagreed with the others over the firm’s valuation in a potential sale or funding round.
“The big takeaway from the Snapdeal-Freecharge situation is the fact that the consumer internet market is growing very slowly. This is not China. Just because everyone has internet access does not mean the internet economy is growing,” said Rutvik Doshi, director at the India arm of Inventus Capital Partners.
“And that’s not going to change in the next few years—the GDP (gross domestic product) is not suddenly going to grow at 10-12%. What we have seen so far is too much exuberance and optimism from investors and that’s not going to help. When that happens, you end up with a situation like (Snapdeal and Freecharge),” he added. BENGALURU: Infosys independent director and co-chairman Ravi Venkatesan on Wednesday said the company certainly would not want to label co-founder and promoter NR Narayana Murthy as a shareholder activist, but consider him a “well-wisher.”
“I would like to see him — Murthy — as a well-wisher of Infosys, which he has been and will continue to be so... I don’t think we should label him as A or B, and certainly not as a shareholder activist,” he told the Press Trust of India in an interview. He was responding to a query on whether the company would prefer to see Murthy, who has been flagging falling corporate governance standards, as shareholder activist or a well-wisher.
Venkatesan said he regards Murthy not only as the founder, but a mentor, and hoped that the relationship with him continues in a productive way for a long term.
Infosys had flagged actions by “activist shareholders” as a risk factor, which could potentially require the company to incur significant legal fees and public relations costs. In its annual filing to the US Securities and Exchange Commission, Infosys said such activities could interfere with the company’s ability to execute its strategic plan. Over the past few months, the company has been battling allegations by Murthy and other former senior executives of falling corporate governance standards.
Asked who are the shareholder activists the company is wary about, Venkatesan said, “I think that is the question for CFO Ranga (Ranganath D Mavinakere).” He however said the company’s risks are not related to a single event, which unfortunately the media picked up, but to 55 risks including cyber security risk. “We called out 55 risks... we have clarified both the company and I that we didn’t intend to call out any one individual (Murthy) or group in particular, but as a generic risk,” he added.