Global payments giant PayPal is reportedly going to acquire a minority stake of around 25 percent in Indian payments startup Freecharge. According to a report from LiveMint, PayPal is in final stages to acquire stake for around $200 million.
While the deal has not yet been announced officially, there are high chances of that it soon becomes official, given that PayPal has filed a trademark infringement case against Paytm alleging that Paytm uses colour patterns in its logo similar to those it uses.
This investment from PayPal in Freecharge could heat up the online payments markets in India, which is already thriving due to the recent demonetisation move from the Government of India and increasing push towards cash-less economy.
A person aware of the matter said that the board of Jasper Infotech Pvt. Ltd., the parent company of Freecharge and Snapdeal, will discuss the matter in the first week of January. He further says that PayPal was interested in acquiring majority stake of Freecharge, around 51 percent, but SoftBank is interested in selling around 20-25 percent stake. He said:
PayPal’s initial offer was for a controlling 51% stake in Freecharge. But SoftBank, which is the largest shareholder in Snapdeal, is not keen to divest a majority stake and may sell between 20-25% in Freecharge, although a final decision is pending.
For this particular deal, PayPal is believed to have hired Goldman Sachs as an adviser while Deutsche Bank is advising Jasper Infotech. For Jasper Infotech, founder Kunal Bahl and Snapdeal’s head of M&A Abhishek Kumar are leading the deal. The transaction is also subject to approval by the board of Nasdaq-listed PayPal.
Recently, it was reported that SoftBank was in talks to invest up to $150-200 million in Freecharge along with other investors. The deal would have valued the company at around $900 million to $1 billion.
In the LiveMint report, a person aware of the development, said, “While there were a few more financial investors ready to invest in Freecharge, what makes PayPal’s offer interesting is that it comes with global experience and know-how”. He further added that “this is the primary reason Snapdeal’s board is keen to consider the offer in the first place.”
Freecharge was founded in August 2010 by Kunal Shah and Sandeep Tandon. After raising about $113 million in multiple funding rounds, the company was acquired by Snapdeal in April last year for roughly $450 million.