Snapdeal aims for 10 more investments this fiscal to take on Flipkart & Amazon in India's $3bn e-commerce industry

NEW DELHI: Snapdeal, fresh after closing India’s biggest startup acquisition, is aiming to make up to 10 more investments this fiscal year, rapidly stocking up on ammunition to take on Flipkart and Amazon in India’s $3 billion ecommerce industry. The company, in the midst of an attritional war with the rival online marketplaces, has bought eight companies in the 5 years since its launch, perching itself on top of India’s startup mergers and acquisitions leaderboard. While Snapdeal does not disclose the war-chest it has for buyouts, its recent acquisitions have been fuelled by the nearly $1 billion (about Rs 6,300 crore) it raised last year.

About 60% of its total budget is earmarked for technology and acquisitions, according to sources. The company has, typically, targeted buyout opportunities in the broader mobile and data analytics space, with a number of its purchases mimicking that of Chinese e-commerce behemoth Alibaba Group as it attempts to create a complete ecommerce ecosystem.

“We may end up making a total of 10 (acquisitions) this (financial) year, subject to something being there that is interesting,” Kunal Bahl, cofounder and chief executive of Snapdeal, said in an interview to ET. Earlier this month, Jasper Infotech, which owns and operates Snapdeal.com, acquired payments and mobile recharge startup Freecharge in a cash-and-stock deal estimated at $450 million - the most expensive acquisition in India’s nascent consumer internet sector. ET was the first to report about the deal on March 12.

“(Acquisitions are) the only way to grow,” said Rachna Nath, retail and consumer leader-India, at audit and consultancy firm PricewaterhouseCoopers. “The days of organic growth are long gone.” Snapdeal’s Freecharge acquisition, which took about a month to close, trumped India’s most valuable startup Flipkart’s $330 million acquisition of online fashion retailer Myntra last year. Bahl said Snapdeal, backed by Japan’s SoftBank, will consider writing cheques similar to the amount it paid for Freecharge for the right opportunities and strategic fit.

“If tomorrow there is something that brings similar strategic value, would we be open to paying whatever price it is? Absolutely,” Bahl said. “But looking at the landscape in India, there aren’t that many other breakout companies. But we will assess such future opportunities on merit, and not price.” Snapdeal has acquired four companies since it announced in May last year that it would look to buy 4-6 firms in the justconcluded fiscal year. Among these were gifting recommendation firm Wishpicker, premium fashion website Exclusively.in, and ecommerce management software firm Unicommerce.com – the last two deals were closed this year, before Freecharge.

The latest acquisition could see Snapdeal, which has about 40 million users, add Freecharge’s 20 million to its overall count. What this also allows is for Snapdeal to potentially lower its customer acquisition costs, typically a huge burden on e-commerce companies, as well as reduce the cashon-delivery (COD) mode of payment.

“Snapdeal’s acquired Freecharge’s technology, its customers and have also increased the choices given to them. The deal has given them a lot of capabilities,” said PwC’s Nath. “Our expectation is that over the next one year, we will see a 20% drop in COD failures from Snapdeal because most of the incoming Freecharge customers, who are now buying on Snapdeal, a majority of them are choosing to continue to buy using prepaid instruments on Snapdeal as well,” Bahl said.

New Delhi-headquartered Snapdeal kicked off the current financial year picking up a majority stake in digital financial services platform RupeePower-.com for an undisclosed amount as it looks to create a financial services marketplace. It also bought a minority stake in logistics venture GoJavas to strengthen its delivery network.

Bahl said the Freecharge acquisition will add about $1 billion to the company’s overall gross merchandise sales, which is currently estimated at $3 billion. GMV, akey metric for electronic marketplaces, is the total value of the goods sold on a platform. Snapdeal is currently ramping up hiring at Freecharge as it aims to dominate the online utilities payments and mobile recharge market, competing with One97 Communications-owned Paytm, which is backed by Alibaba Group affiliate Ant Financial. “We have already started ramping up hiring. Our goal is to hire at least 50 engineers over the next two months at Freecharge - engineers and product managers, all in Bangalore,” Bahl said.