If the merger goes through, both digital wallet firms may have about 45-50% stake in the merged entity.

Consolidations continue in the ecommerce space MobiKwik FreeCharge explore merger
Atom Digital Wallets Tuesday, April 25, 2017 - 10:17

While Snapdeal’s sale to Flipkart is awaited, it looks like Snapdeal’s digital payments arm FreeCharge will also be sold off soon as well. According to a report by VCCircle, rival digital wallets player MobiKwik has approached FreeCharge for a merger.

Sources have told VCCirlce that Gurgaon-based MobiKwik has approached FreeCharge for a merger in an all-stock deal. But while the discussions are at an early stage, it may happen sooner than expected.

Like parent Snapdeal, FreeCharge has also been struggling to raise fresh funds for over a year now. MobiKwik on the other hand, has been in talks to raise a larger round of funds.

Both MobiKwik and FreeCharge are worth $300 million, each. If the merger goes through, both wallets may get about 45-50% stake in the merged entity.

“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 told VCCircle.

“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,” he added.

If FreeCharge and MobiKwik come together, the Chinese investor looking to invest in an Indian company is likely to put in $200 million in the merged entity.

VCCircle had earlier reported that with private equity investors not favouring the company, FreeCharge was in talks with several companies including Paytm, PayPal and PayU for strategic alliances

Snapdeal acquired FreeCharge in 2015 for $400 million in a stock-and-cash deal. However, over the past few months, the company has been struggling. According to VCCircle, last month Jason Kothari was appointed as the CEO of FreeCharge in an effort to turn the company around.

MobiKwik, founded by Bipin Preet Singh has raised around $80 million so far with investors like Sequoia Capital, Tree Line Asia and American Express on board. It has been on an aggressive expansion plan and had announced that it will be investing Rs 300 crore to get more merchants and users.

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