New Delhi: Online marketplace Snapdeal.com is expecting its biggest acquisition, FreeCharge.in, a mobile recharge services firm, to contribute close to a billion dollars to gross merchandise value (GMV, or cost of goods sold) by the end of the fiscal, according to a top company executive.
Snapdeal recently touched a GMV of $3.5 billion, the company said.
“We want to create the largest utilities payments marketplace in India. We can expect FreeCharge to pan out into a holistic utility product,” said Kunal Bahl, co-founder and chief executive at Snapdeal.com. “Utilities are currently a $100 billion market in India and are largely driven offline. We want to organize that market.”
Snapdeal, which has been on an acquisition spree, in April acquired FreeCharge in a $450 million deal and helped Snapdeal build the largest mobile commerce company in India.
Since the acquisition, the transactions on the FreeCharge platform are up 50%, making Snapdeal the company with the highest daily transactions and the largest user base. These two key metrics play a vital role when investors are valuing the loss-making e-commerce businesses in the country.
Bahl sees utilities payments as a huge window of opportunity for FreeCharge to tap into. He said that of the 75 million mobile top-ups done in a day, only 2-3 million are online currently.
Snapdeal, promoted by New Delhi-based Jasper Infotech Pvt. Ltd, expects FreeCharge to eventually allow electricity bills, water bills, etc., to be paid online.
According to Bahl, the acquisition of FreeCharge has worked well for Snapdeal as there is a significant synergy between the two companies: together, the two entities have 15 million debit/credit cards registered on the platforms. “The overlap in the users was only 4%, which means an incremental user base. Their user base is 15-25 years old, while our users are largely in the age bracket of 25-35 years,” said Bahl.
Founded in 2010, FreeCharge raised more than $120 million from Sequoia Capital, ru-Net, Sofina Capital, Valiant Capital and Tyborne, including about $80 million in February.
Snapdeal and FreeCharge together generate more than one million daily transactions and have over 50 million users on the mobile. Even though a majority of these transactions are low-value, money-losing recharge deals, and these will hit Snapdeal’s current average transaction amount, the sheer size of the transactions may help the firm attract higher valuations.
Snapdeal, which in the last six months has acquired close to six companies, including Freecharge, online financial services firm Rupeepower, online portal for premium and luxury fashion Exclusively, Martmobi and Letsgomo Labs, could launch other marketplace platforms, too, in order to go after the entire $1.4 trillion consumption spend in India.
“Just like social media, where people have moved to multiple apps, e-commerce, too, will need a clan of marketplaces in order to cater to the different consumption spends of India,” said Bahl. “In a 4-inch screen world, user interfaces will have to get simpler because there is limited space and real estate.”
Bahl plans to integrate Snapdeal, Freecharge, Rupeepower and Exclusively to allow consumers to have common credentials and checkout option. “We will create like an Alipay account, which consumers can use to transact on any Alibaba platform,” said Bahl.
Mobile commerce is growing rapidly in the country and the number of mobile Internet users is expected to increase to 480 million by 2017, according to a joint report by Google and A.T. Kearney.
“The entire utilities or bill payments space is a huge opportunity though there are several challenges. A lot of government organizations have already tied up with banks and other private companies for online bill payments, so Snapdeal needs to have a clear differentiation as to why would someone use them. The consumer trust is still very low with paying such bills online,” said Harish H.V., partner, Grant Thorton, a consultancy firm.
