Monday, 24 July 2017

Investopedia/Daniel Liberto: Amazon Bids $70-$80 Million for Indian Payment Platform

By Daniel Liberto | July 24, 2017 — 6:44 AM EDT

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Amazon (AMZN) has tabled a late bid to acquire FreeCharge, the digital payment platform owned by troubled Indian ecommerce company Snapdeal, according to a local media report.

The Economic Times, citing two sources familiar with the matter, reported that Amazon, which recently pledged to continue investing billions in India, the world’s fastest growing ecommerce market, bid between $70 million and $80 million for the firm. The U.S. tech giant reportedly wants to integrate FreeCharge with its online payments processing service Amazon Pay. However, sources believe that Amazon’s offer might have come too late.
Bidding War

According to the Economic Times, Axis Bank is widely tipped to emerge as the winning bidder for FreeCharge, despite offering significantly less than Amazon. India’s third-largest private sector lender reportedly tabled a bid in the region of $60 million to $65 million just over two weeks ago.

Mobile wallet specialist Airtel Money and electronic payment firm Paytm have also been engaged in talks to acquire FreeCharge. The Economic Times claims that Paytm, which counts Alibaba (BABA) among its largest shareholders, bid $10 million.

The fact that Snapdeal is entertaining offers well under the $400 million it paid for FreeCharge in 2015 is indicative of the company’s struggles. Snapdeal, once India's start-up poster boy, has posted heavy losses in recent times, driven by rising expenses, unsuccessful acquisitions and fierce competition from domestic and foreign players such as Amazon and Alibaba in the country’s online retail market. (See also: The Race for India's E-Commerce Market.)

To ease these challenges and raise some much needed cash, Snapdeal has been trying to offload FreeCharge, one of its most attractive assets. It has also been exploring the possibility of selling its entire operation — at the end of last year Alibaba reportedly bid $2 billion to buy out the firm. (See also: India's Snapdeal Denies Reports of Alibaba M&A Interest.)

At its peak, FreeCharge expected to conduct 7 million daily transactions. However, the digital payments platform has since struggled, due in part to a lack of financing from its parent company.
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