Axis projects returns from Rs 385-cr FreeCharge acquisition in 2-3 years

Private sector lender Axis Bank has acquired digital payments company FreeCharge for Rs 385 crore. The bank will get FreeCharge’s 50 million wallet users and 0.2 million merchant base, helping it to scale up its presence in the digital payments space.  

Axis Bank Chief Executive Officer Shikha Sharma said that the bank expects to gain returns on the investment in approximately two to three years.

The bank projects that its customer base will double with the acquisition. However, there may be an overlap with the bank’s existing customer base. The payments platform will bring digital only, mobile first, and young customers to the bank’s network. The bank plans to tap the high-frequency usage of the wallet and promote their various existing products by integrating it into the app.

The Reserve Bank of India's regulations specify that a bank can have only one prepaid payments instrument (PPI) license. Axis Bank already has a PPI license for its existing wallet and has to surrender either of the licenses. Regardless, the bank plans to retain FreeCharge as a separate entity subject to regulatory approval.

Axis Bank Chief Financial Officer Jairam Sridharan said, "The aim of the acquisition is to combine the agility of a fintech (financial technology) company with the strength of a bank." The bank plans to retain the FreeCharge brand, including the name, customers, management, and 200 employees.

The bank wants to extend FreeCharge beyond the cash-burn model. Sharma said, "The cash-burn model is not sustainable. The facilities provided and the ease of service will be the deciding factor in the long term."

Axis Bank said that the acquisition is a strategic fit with payments being at the core of its retail strategy. The bank plans to invest extensively in FreeCharge and scale the business further.