Snapdeal is finally selling off FreeCharge, its mobile transactions platform, to private sector Axis Bank. The bank said in a communication to the Bombay Stock Exchange that it has entered into a share purchase agreement with Jasper Infotech Private Ltd, Snapdeal parent, to acquire 100 percent equity in FreeCharge for a consideration of Rs 385 crore.
But interestingly, now the deal is happening at just Rs 385 crore. So is Snapdeal selling FreeCharge for a song? Not really, aver analysts for they reason that the price at which FreeCharge was acquired by Snapdeal was ‘unrealistic’.
The price paid by Snapdeal for FreeCharge was a ‘lot of money even then’, said Sanchit Vir Gogia, Chief Futurist, Founder & CEO, Greyhound Knowledge Group. “That was an inflated price for FreeCharge then and I expected the valuation to drop,” he said.
When a company is being sold for one-sixth of the price at which it was bought, it means there was some ‘gross miscalculation’ about its valuation, Gogia said.
Gogia feels that Rs 385 crore is the ‘right’ price for FreeCharge now. “This is the real price of FreeCharge,” he said.
The sale price of FreeCharge is a good wake-up call for the startup ecosystem, founders, investors and those planning to buy similar startups, said Gogia. “Me-too products cannot survive and consolidation is the name of the game. Even Paytm had to turn into a bank to be successful,” he said.
The card space is getting obsolete not just in India but also worldwide. With the government encouraging digital payments and with UPI and the BHIM app, the sector is going to do well, said Gogia.
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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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