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MobiKwik, FreeCharge explore merger

24 April, 2017

Amid merger talks between Flipkart and Snapdeal, FreeCharge’s fate could also be decided soon. The struggling digital payments arm of Snapdeal has been approached by a rival wallet company for a merger, one person aware of the development told VCCircle

Early last week, Gurgaon-based mobile wallet firm MobiKwik had approached FreeCharge for a merger in an all-stock deal, the person said, requesting anonymity. “Although the discussions are at an early stage, it may happen sooner than expected.”

FreeCharge has been struggling to raise fresh funds for over a year, while MobiKwik had been in talks to raise a larger round for the past couple of months.

“Both have been trying to raise funds, but for some reason it has not happened so far. There’s a strategic investor in China who wants to invest in a stronger wallet company in India,” the person said. “Everybody knows that Paytm is dominant, hence nobody wants to invest in a company that is not really well-placed. But, a merged entity may have more muscle to rival Paytm.”

If both wallet firms come together, the Chinese investor looking for an India entry is likely to put $200 million in the new merged entity, he added.

Both MobiKwik and FreeCharge are worth $300 million, each, and would get about 45-50% stake in the merged entity.

MobiKwik and FreeCharge did not immediately respond to queries from VCCircle.

Besides MobiKwik, FreeCharge was earlier reported to be in talks with several strategic companies, including Paytm, PayPal and PayU, with private equity investors not favouring the company.

Over the past several months FreeCharge had been in the news for its fundraising efforts – Snapdeal had been trying to raise $150-200 million since it acquired the mobile recharge platform in a $400-million stock-and-cash deal in 2015.

In fact, last month Jason Kothari was appointed as the CEO of FreeCharge in an effort to turn the company around.

VCCircle had recently reported that Snapdeal had been working with several investment banks to sell FreeCharge for a valuation of $400-500 million.

So far, MobiKwik has raised about $80 million. It counts Sequoia Capital, Tree Line Asia, Cisco Investments, American Express and MediaTek as its investors.

In February, MobiKwik had announced its plans to invest Rs 300 crore on acquiring merchants and users, as it looked to increase its share in the highly-competitive payments market in India. It had also spent Rs 50 crore to set up 13 offices and hire over 1,000 employees.

Founded in 2009 by husband-and-wife duo Bipin Preet Singh and Upasana Taku, MobiKwik claims to have 45 million-plus users on its platform and a network of more than 1 million direct merchants. The company was looking to end the year with 150 million users and five million merchants.

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MobiKwik, FreeCharge explore merger

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