Snapdeal may ink biggest deal in Indian e-tail if it buys Freecharge for Rs 2800 cr

As Chinese e-commerce giant Alibaba is reportedly in talks with Snapdeal over a potential cash investment, the Indian online marketplace maybe looking to ink the biggest deal in Indian e-commerce by lapping up online mobile recharge platform Freecharge for Rs 2,800 crore.

According to a report in the Economic Times , the deal is to be expected in the combination of about 40 percent cash and the balance in stock.

Freecharge tracks online/offline purchase behaviour of consumers, by offering them incentives and coupons to transact on its platform.

According to the ET report, Freecharge raised $80 million (Rs 496 crore) in funding in February 2015, as it looks to increase its customer base by two to three times from the current 20 million. It is backed by Sequoia Capital and hedge funds Valiant Capital and Hong Kong-based Tybourne Capital Management, which incidentally is also an investor in Snapdeal.

Till date, the biggest deal in the consumer internet space so far has been Flipkart’s acquisition of fashion portal Myntra in 2014 for Rs 2300 crore. As Snapdeal looks to build competence in the mobile and data analytics space, a deal with Freecharge will give the former access to the fast-growing mobile platform as well as access to card information.

Earlier this year, Snapdeal, which raised over $1 billion last year from investors including Japan’s SoftBank Group, said it is looking at up to five acquisitions in the technology space this year.

Incidentally, SoftBank also has an investment in mobile advertising venture InMobi, which is reportedly in talks for being bought out by Google.

The competition is clearly getting intense with rival Flipkart recently buying  mobile ad network AdIquity, for an undisclosed amount, which is why perhaps Snapdeal is getting even more aggressive this fiscal.

In an interview with Firstpost last month, Snapdeal co-founder and CEO Kunal Bahl made it clear that the firm wants to become the most profitable e-tailer in India.

“Alibaba turned profitable in the 11th year after its inception and now generates over $5 billion in EBITDA. Given our business model is similar to Alibaba’s and has the same operating leverage as their business, we believe once our investments in technology and logistics infrastructure reach a satisfactory equilibrium, we should become the most profitable e-commerce company in India,” Bahl had said.

The company has already made five acquisitions over the last five years and is looking to make five more this year alone.  Last month, it  acquired the online luxury fashion store Exclusively.com for an undisclosed amount. In December 2014, Snapdeal acquired gift recommendation portal Wishpicker.com for an undisclosed amount.

It had previously acquired the Delhi-based fashion & lifestyle product discovery site Doozton, in April. In May 2013, Snapdeal bought handicraft marketplace Shopo.in and in 2012 it bought online retailer of sports and fitness equipment Esportsbuy.com. Back in 2010, the company acquired the group buying site Grabbon.

Technology is a primary focus area for Snapdeal as its scales up rapidly. Bahl had told Firstpost that by March, the engineering team at Snapdeal will have 1,500 people.