FreeCharge sale adds to Snapdeal founders’ arsenal; says time to 'seize opportunity’
NEW DELHI: The sale of Snapdeal‘s digital payments platform FreeCharge to Axis Bank for Rs 385 crore has provided chief executive officer Kunal Bahl with added ammunition in his battle to retain control over the embattled online marketplace and possibly prevent its sale to rival Flipkart.
The sale of FreeCharge to the country’s third-largest private sector bank on Thursday, which was first reported by ET, was a “great outcome,” Bahl wrote in an email to employees late on Thursday.
“For Snapdeal, this is also a great outcome as it provides us the necessary boost in resources to continue our journey towards building an e-commerce platform that enables sellers across India to reach consumers in every corner of the country,” Bahl wrote in his email, a copy of which was accessed by ET.
In what could be seen as a rallying cry to the troops, Bahl wrote, “We have an opportunity of a lifetime here, and we must seize it and make the most of it.”
Bahl and Rohit Bansal, chief operating officer and cofounder, are fighting to retain control of Snapdeal and prevent its sale to Flipkart in a deal that values the Gurgaon-based ecommerce marketplace at $850 million, a far cry from its peak valuation of $6.5 billion barely a year ago.
The founders have proposed running what has been described as a leaner and a stripped down version of the ecommerce company, with a smaller workforce, while also selling off other assets, such as its logistics arm Vulcan Express.
The sale of Snapdeal, being orchestrated by Tokyo-based SoftBank Group Corp., the largest stakeholder, has, however, continued to face multiple hurdles that have divided the board while also raising concerns among its many minority stakeholders.
The list includes PremjiInvest, the personal investment arm of Wipro Chairman Azim Premji, BlackRock, Temasek, the investment firm backed by the government of Singapore, Ontario Teachers’ Pension Plan, Foxconn and Alibaba Group, which do not have board representation and cumulatively own about 40% of the company.
Jasper Infotech, the parent company of Snapdeal and FreeCharge, is expected to place the Flipkart bid before all stakeholders next week for their approval. Parallelly, it will start negotiating a sale and purchase agreement with Bengaluru-based online domestic retail giant Flipkart.
Investment bank Credit Suisse and law firm J Sagar Associates are advising Jasper Infotech on the transaction, while Flipkart is being advised by Goldman Sachs and Khaitan & Co.
A majority of the board, led by SoftBank, Kalaari Capital and Nexus Venture Partners are believed to have informally given their assent to the sale, but Flipkart has demanded “100% approval” from all shareholders before going ahead with the acquisition.
The proceeds from the sale of FreeCharge to Axis Bank could provide Snapdeal, a one-time contender for the pole position in India’s fast-growing ecommerce sector, with much-needed liquidity to stay afloat for the next few months.