Bengaluru: Axis Bank Ltd is nearing a deal to buy digital payments platform Freecharge for Rs350-400 crore in cash, giving much-needed 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 start-up 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)."

Axis Bank on Tuesday had reported a 16.07% fall in net profit for the quarter ended 30 June because of higher bad loans and provisions. On Wednesday, its shares fell 2.9% to Rs528.85 on the BSE, while the benchmark Sensex ended up 0.48% at 32,382.46 points.

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