Paytm May Acquire Freecharge; Signs Non-Exclusive Term Sheet Which Predicts $45-90 Million All Cash Deal

In the year 2015, Snapdeal has acquired Freecharge at a rumored valuation of $450-500 million in cash and equity.

This is 2017, and reports have emerged that Paytm may acquire Freecharge at a valuation of $45-90 million, which is 900% to 455% less than the original rumored worth.

Reports have emerged that Paytm has signed a non-exclusive term sheet to acquire Freecharge, which was signed earlier this week. Non-exclusive term-sheet means that Snapdeal, which owns Freecharge, can approach other investors and fundings houses as well, for selling Freecharge.

Analysts are predicting that Snapdeal will try its best to sell off Freecharge, because it will reduce their liabilities, and make their own acquisition somewhat favourable and likely. Flipkart is likely to acquire Snapdeal, at a valuation of approximately $750 million, which has been reduced from $1-1.5 billion which was earlier predicted. That deal is facing obstacles as Nexus Venture Partners is not ok with the proposed valuation, and its implications.

As per some analysts, sale of Freecharge to Paytm will make Snapdeal’s position a little better, and they would be in a better position to negotiate.

Earlier, Paytm was in talks to invest in Freecharge.

On the other hand, Paytm is about to receive one of the largest VC fundings ever, as SoftBank is about to invest $1.5 billion, at a valuation of $7-9 billion.

The Mystery Of Freecharge’s Acquisition Deepens

Last year, Paypal was about to acquire Freecharge, but then, differences arose regarding its valuation, and the talks terminated. Some reports also claimed that SoftBank was not comfortable with Paypal making inroads into a startup where they have invested.

Paypal is a direct competitor of several fintech startups where Softbank has invested.

Besides, MobiKwik, another major competitor of Paytm in India had also expressed interest in acquiring Freecharge, but nothing concrete came out.

Paytm signing the term sheet makes it more probable that Freecharge will finally end up with them. However, considering that the term-sheet is non-exclusive, other options are also open for Snapdeal.

This is certainly an unfortunate reversal of fortune for Freecharge, which promised a lot in the initial days of its acquisition by Snapdeal. They had predicted that by end of 2017, they will possess 7 million transactions a day, and will successfully deliver gross  merchandise transactions of Rs 20,000 crore.

As per April data, Freecharge processed Rs 300 crore worth of transaction revenue, via 12 million transactions.

On the other hand, Paytm processed 255 million transactions in April (till 26th), with an average of 10 million per day. In the last fiscal year, they processed $1.5 billion of transactions on their platform.

As per data filed with registrar of companies, Snapdeal has pumped in close to Rs 420 crore into Freecharge till date.

We will keep you updated as we receive more information regarding this acquisition.

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