Did Axis Bank Lap Up FreeCharge For A Song, Or Pay A Tad Too Much?

India’s third-largest private-sector lender Axis Bank snapped up beleaguered digital wallet firm FreeCharge for $60 million (Rs 385 crore) last week. In the process, it pipped other suitors such as bigger digital wallet firms Paytm and MobiKwik, e-commerce major Amazon, payments firm PayPal, Airtel Money and South Africa’s Internet group Naspers.

Fairly valued?

Sanchit Vir Gogia, Chief Futurist, Founder & CEO, Greyhound Knowledge Group, beleives the price paid by Snapdeal for FreeCharge was steep. “That was an inflated price and I expected the valuation to drop. When a company is being sold for a sixth of the price it was bought at, it means there was some gross miscalculation about its valuation. Rs 385 crore is the right price for FreeCharge,” he says.

“Axis Bank will get access to FreeCharge’s sellers and partners. Moreover, FreeCharge is a more feature-rich wallet that Axis Bank can further integrate with unified payments interface (UPI),” Gogia explains.

But it’s not as simple as it appears. Gogia says the largest e-commerce vendors are not Flipkart or Snapdeal, but the banks themselves because they are busy selling a lot of small-ticket transactions. “Although banks have been helping customers with NEFT and IMPS, they don’t have anything customer-facing at a scale like FreeCharge’s.”

Firepower to take on competition?

“By itself, wallet is a small business without UPI and the banking system involved. When a transaction is backed by a bank, people get the confidence of making large transactions. That will make a difference,” Gogia says. “While Paytm is doing fantastically well in the wallet business, pivoting to a bank is not that straightforward…We should not oversimplify this journey for Paytm,” he adds.

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Analyst:

Sanchit Vir Gogia: Sanchit is the Chief Futurist, Founder & CEO of Greyhound Knowledge Group, a Global Strategy & Transformation Research, Advisory & Consulting Group. He also serves as Chief Analyst & CEO of Greyhound Research, a Global, Award-Winning, Independent Technology & Innovation Research, Advisory & Consulting firm. To read more about him, click here.


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