Paytm looking to snap up FreeCharge for $45-90 million

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Founded by Kunal Bahl and Rohit Bansal in 2011, Snapdeal was one of the early unicorns among the Indian start-ups and was the second-largest e-commerce marketplace in India till about a year ago.

Online payment service provider Paytm is reported to have signed a non-exclusive term sheet to acquire rival digital payments platform FreeCharge, from beleaguered online marketplace Snapdeal, in an all-cash deal estimated to be worth between $45 and $90 million.

After convincing early-stage investor in Snapdeal, Kalaari Capital, to agree to the sale, SoftBank is said to be close to getting the nod of approval from Nexus as well.

However, market insiders said that the deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian e-commerce space and change the landscape of the sector that is witnessing intense competition among players. The Masayoshi Son-led group had pumped in $900 million since first investing in Snapdeal in 2014. Taking advantage of the downfall of FreeCharge's parent company Snapdeal, whose leading investor SoftBank is now in talks for its own sale to Flipkart, the company has been able to acquire Freecharge for a lower than expected deal value. Snapdeal, which was valued over $6 billion during its last funding round in February a year ago, is said to be valued at a meagre $1 billion through this deal. "Indian e-commerce companies have seen funding dry up over the last few months as investors are focusing extensively on profitability and rationalisation of expenses", they added.

It is nearly equal to the money it put in the home-grown marketplace. On Wednesday, SoftBank said it suffered a loss of $1billion ('6,500 crore) on its investment in Snapdeal during 2016-17.

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Sources in the know of the goings-on said the final outcome of the due diligence being conducted by Paytm will determine the fate of Freecharge.

Snapdeal in recent months has had to trim its workforce significantly and shut down non-core businesses.

"(The) highly competitive e-commerce market in India has made a trend of the company's (Snapdeal's) business performance lower than initially anticipated", SoftBank said in a statement.

The Snapdeal founders Bahl and Bansal have gone directly to employees with a string of townhall meetings, promising profit and brushing off takeover talk. The firm has also invested in grocery delivery start-up Grofers.