Vulcan Express: Innovation at its best


“There have been many others who have tried to build what Unicommerce has but no has been able to succeed at it,” says a former Snapdeal employee with knowledge of the company. He asked not to be quoted in exchange for being candid. He added that Flipkart could do with a strong business-to-business product such as Unicommerce. But is the Bengaluru-based company even interested in the purchase of Unicommerce? No. It has for some reason kept its distance and prefers its own internal solution instead.


Late in May and June, Paytm took a serious, close look at FreeCharge. The company spent quite a few weeks in due diligence. According to a senior Paytm official, The Ken spoke with, it then made an offer of Rs 65 crore for FreeCharge.

That’s just under $10 million. What was the asking price? $65 million. Now, take a step back and think about this. Just about two years ago, Snapdeal acquired FreeCharge for $400 million, cash and stock. In the garage sale, the ticket price for FreeCharge was put up at $65-70 million. The offer from a suitor; $10 million. Only fair to say that Snapdeal wasn’t too happy about this.

“We only wanted to acquire FreeCharge because we didn’t want it to go to Flipkart,” says the Paytm official mentioned above. He requested not to be named because he is not authorized to speak to the media. “But during the due diligence, we learned a lot of things. Like its offline business is small. It does about 6,000 transactions every day. That’s really small. And its online business is mostly recharged. That’s how we arrived at our final offer number.”

As things stand today, the Paytm FreeCharge deal is in cold storage. Snapdeal has widened the search.

That includes a range of suitors from Axis Bank and most recently Amazon. At least, that’s the talk. Interestingly, all its suitors have a wallet license or have applied for one, so the buyer is most definitely not for its wallet business. Of all its suitors, Axis Bank could be the best home for it given FreeCharge’s recharge demography.

The majority of FreeCharge’s users are in the 18-24 age group. A group that would make sense for Axis Bank for whom attracting newer and younger users is the biggest challenge. Additionally, for Axis Bank, it is a chance to drive other payment systems like the Unified Payments Interface (UPI) through FreeCharge. Even though FreeCharge said it would tie-up with Axis Bank to allow the UPI as an option in 2016, Axis Bank saw muted adoption. Moreover, the price at which it is being sold makes it an attractive buy.

Axis Bank, which is in its silent period, didn’t want to comment on the potential purchase. The silent period is the time before a company announces its annual results and does not interact with the media.

FreeCharge is also a grim reminder of what it could have been. It was a small but plucky company that enabled recharges and gave coupons that made for four million transactions a month and 250 employees before Snapdeal acquired it for $400 million. With Snapdeal, it turned into a payments company doing 10 million transactions a month at its peak, had 30 million users and 850 employees. And, today, it is a mere shadow of itself, with two million transactions and 400 employees.

Role of the Vulcan Express

It was supposed to be an important part of the Snapdeal portfolio. Snapdeal would be where customers shopped, Unicommerce helped sellers, Freecharge offered a payments ecosystem and Vulcan delivered. The order would never leave Snapdeal’s extensive network. To bulk up Vulcan, Snapdeal leased out nine warehouses across the country, got robots to stack and developed an internal sorting system, which would reduce delivery times.

“That sorting system is useful. Anything that decreases delivery times is worth its weight in gold in this business,” says one of the former executives quoted above. While this may add to its allure, the rest doesn’t. “Currently, Ekart (Flipkart’s logistics arm) is functioning at 60-63% capacity.

It won’t need more,” he adds. The need for additional logistics capacity comes up during the sale season in October. “But planning for that is already done. And there is no immediate need for Vulcan,” the former employee adds.



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