India’s Snapdeal Acquires Freecharge, Eyes Alibaba-Style Ecosystem On Subcontinent

Jasper Infotech Pvt. Ltd., the startup behind Indian online shopping site Snapdeal.com, has acquired Accelyst Solutions Pvt. Ltd., which runs rewards and coupons site FreeCharge.in. The stock and cash acquisition is a step toward creating an “even more acute version” of an Alibaba-style digital commerce ecosystem in India, Kunal Bahl, Snapdeal’s founder and chief executive, told reporters in Bangalore on Wednesday.

Bahl declined to give full financial details.

The deal underscores the race to be the first and preferred one-stop-shop to sell everything from toilet seats to luxury cars in a nation whose 185 million active monthly Internet users are usually found online on their smartphones. Another half-billion potential Internet users remain untapped.

New Delhi-based Snapdeal, backed by investors including Japan’s SoftBank Corp., is competing with Bangalore rival Flipkart Ltd. and Amazon.com Inc., which is spending some $2 billion to ramp up operations in India. Snapdeal and FreeCharge together have some 40 million users and see a combined 1 million transactions a day, Bahl said.

Deals and investments are picking up in India’s online commerce scene, as smartphone penetration reaches critical mass, pushing into smaller cities and towns in the world’s third-largest wireless market. Separately, on Wednesday, MobiKwik, a mobile wallet startup, said it had raised close to $25 million from investors including American Express Co.

At Snapdeal, business is increasingly coming from areas outside major Indian centers like Delhi and Bangalore, Bahl said. “In small towns, they have aspiration but no access,” he said. As mobile apps such as FreeCharge and MobiKwik ride smartphone penetration and growing 3G and 4G networks, access becomes less of a problem.

FreeCharge offers discount coupons that equal the value of a wireless plan top-up. Of India’s nearly 1 billion wireless subscribers, 95 percent are on prepaid plans, spending an average of about $3 a month. FreeCharge entices people to top up their plans more willingly by offering equal-value discounts that can be redeemed at restaurants, pizza parlors and burger shops and so on. The opportunity is large because only about 3 percent of the 75 million mobile recharges done in India every day happen online.

Buying FreeCharge, which holds one of the largest databases of stored-card users in the country, will help Snapdeal boost its sales through some “intelligent cross-pollination,” states Bahl. For instance, a wireless subscriber using the service to top up his prepaid mobile plan could get a chance to “seamlessly” buy something on Snapdeal, redeeming a discount coupon in the process, and vice versa.