Priyanka Sahay

Very few startups in the Indian ecosystem can claim to have a devaluation as steep as that of Snapdeal owned Freecharge, despite having attractive suitors in the market.

The company which was sold at a valuation of over USD 400 million to Snapdeal in 2015, is now on the block in the market for as low a tenth of its acquisition price.

According to a report in The Economic Times, Flipkart may bid for Freecharge for a sale price ranging between USD 40-75 million.

This happens at a time when Snapdeal itself is expected to close a merger deal with rival Flipkart.

However another report in Business Standard said that Freecharge is also in talks with rival Mobikwik citing the valuations of both the firms at USD 300 each.

Started in 2010, Freecharge has had multiple suitors in past few months including rivals Paytm and Naspers-backed PayU.

In August 2016, when Snapdeal was planning to sell a stake in Freecharge, it pegged the valuation of its payment unit at USD 1.2 billion.

The idea of the Freecharge acquisition by Snapdeal was to expand the user base to millions of users who till then used the wallet only to recharge mobile pre-paid accounts. Later, the company tied up with Yes Bank to launch the e-wallet service.

While Snapdeal had lost the e-commerce race to Amazon and Flipkart, it wanted to catch-up on the wallet race, which was being dominated by Paytm.

During Diwali of 2016, Snapdeal reported around 180,000 orders per day. Freecharge had a significant gain in Snapdeal's Diwali success. E-commerce companies were pushing customers for pre-payments or wallet payments luring them with cash backs and exclusive discounts.

In November, the Modi government announced the demonetisation drive. It was be thought that the e-wallets were the biggest beneficiaries of the demonetisation drive.

But in reality, the same did not happen for Freecharge, as it failed to capitalise.

Freecharge lost to its competitors Paytm and Mobikwik when it came to aggressive on-ground campaigning, challenged by limited funds in the bank.

In an interaction with Moneycontrol, Govind Rajan the then CEO justified low marketing saying that the company was not targeting low ticket transactions like its competitors.

"We are focused on getting consumers who will get repeat transactions. We believe that's the way to grow the business sustainably," he said then adding that the average ticket size of the company had grown to over Rs 500 from Rs 150 pre-demonetisation.

However, soon the reports of mass firing of employees at Snapdeal surfaced. The move was triggered by the lack of money at a time when the company claimed to be targeting profitability.

What came as a surprise to many, Rajan soon quit Freecharge as it failed to raise capital separately.

Currently, Freecharge is in talks with multiple suitors with some reportedly citing the valuation at a fraction of what was touted in August of 2016.

Clearly, very few startups can claim to have had experienced such as massive valuation decline in just a few months.

priyanka.sahay@nw18.com