Axis Bank Buys Freecharge to Boost Digital Payments

It is said, launching a product and make it success is a tough job to do. Hence, even the biggest conglomerates take the path of consolidation. It not only helps the beleaguered company to get on their feet but also provide them a safety net amid the challenging business environment. Just like FreeCharge did.

When FreeCharge started its business of providing online recharge in the year 2010, a lot of hopes were pinned on them. But now it seems the company has failed to deliver its promises just like Snapdeal (a company owned by Jasper Infotech).  The actual reason behind its failure can’t be traced back but the news says it all. The company is going to be acquired by the 3^rd largest private sector lender bank. Now, the question arises why Axis bank is keen to take Free Recharge under its ambit? And how it will affect their stock on the Sensex?

A sneak peek on the data

Freecharge will be acquired by Axis Bank at Rs 385-390 crore, a sharp decline from Rs 2400 crore that Jasper Infotech paid to buy the company in the year 2015, which was at that time the biggest acquisition deal in the Indian e-commerce sector.

Why is Axis Bank keen to take FreeRecharge under its custody?

By now, we all know the government is converting our economy into a cashless economy by launching digital drive campaign. Its moves (My Tax App, demonetization and Reliance Jio Wi-Fi project) at least indicate towards the same.  So, Axis Bank also wants to test the depth of water by acquiring FreeRecharge. It will provide them with 50 million registered users and 2,00,000 merchants. Here’s an excerpt of an interview that talks about the most awaited deal.

“The acquisition of FreeCharge re-affirms Axis Bank’s determination to lead the journey of digitization of financial services. We expect FreeCharge to contribute significantly in our aspiration to serve the digital native and mobile-first young consumers of India,” said Shikha Sharma, managing director and chief executive officer of Axis Bank.

How is it a win-win deal?

It is said that this deal is a double edged sword that will provide benefit to both Snapdeal and Axis Bank. It will actually help the company to raise the funds.

What led to the failure of Freecharge?

Once a competitor (rival Paytm) in a league suffered the setback after the demonetization move! While all other digital wallet companies gained from this move, Freecharge lost its market share resulting in loss of the daily transaction. By this time, the parent company Snapdeal has started to free fall which further lowered down its growth.

How will the stock markets react?

With this consolidation move, it seems the Axis Bank stock will definitely recoup. Rest, time will tell you.

And the news doesn’t end here even the biggest contender of e-commerce market  Amazon tried to acquire Freerecharge at a much higher bid, but it failed to move the needle.