Freecharge.in, a recharge portal run by Mumbai-based Accelyst Solutions Pvt Ltd, claims to be doing 40,000 transactions a day. The recharges are largely for mobiles, followed by data cards and DTH. On an average, the site is doing Rs 60 lakh worth of recharge on a daily basis, which means Rs 219 crore a year.
In addition to recharge services, the site also offers discount coupons of popular food joints and retailers for a small fee. The company further claims to have more than 2.8 million registered users and mentions that most of its users are repeat customers. In January this year, Freecharge claimed to be doing 10,000 transactions a day, with a customer base of 1.5 million.
The startup was set up by Kunal Shah (CEO) in December 2009 and the site went live next year. The company had received an undisclosed seed funding from Sequoia Capital in 2011 and further raised Rs 20 crore from Sequoia in a Series A round earlier this year. Apart from Mumbai, it has offices in Gurgaon and Bangalore, and currently employs a team of 70.
Freecharge has adopted three business models for generating revenues â€“ commissions from telcos/DTH providers for each recharge done on the site, a small fee from customers when they opt for coupons and fees from merchants who come on board. The merchant model varies, though. While some pay for listing their coupons, others pay for distributing those and so on.
Interestingly, merchants account for the largest share of the company's revenues (50 per cent), followed by customer fee for coupons (30 per cent) while recharge commissions come last (20 per cent). This is understandable as the margins in the recharge business happen to be low. In fact, it lies in the range of 0.5-1 per cent, according to Shah.
"But then, we are not a conventional recharge site, rather a marketing company that uses recharge as a medium," explained Shah.
"Rechargeitnow.com existed much before Freecharge, but when we started couponing, every recharge site followed suit. Still, unlike our competitors, we will always focus on being a marketing company for the merchants who offer coupons on our site," he added.
As far as the coupons business goes, the company targets large, national retailers, and claims to have exclusive tie-ups with merchants like McDonald's. According to Shah, around 50-60 per cent of the coupons available on Freecharge are not available anywhere else. So customers don't mind paying a small fee to buy those.
"Just like deals, coupon is a business of scarcity, not abundance. This means if you bombard your customers with coupons, they won't be interested. But if you offer them only a selected few and exclusive ones at that (which can't be found anywhere else), people don't mind purchasing those. Note that most of the daily deals sites that showered consumers with deals have already shut shop (for this same reason)," said Shah. Also, coupons of large national brands (like McDonald's, CafÃ© Coffee Day, etc.) are selling the most, but e-com coupons (coupons for sites like for Inkfruit.com, Yebhi.com, etc.) are the least-selling ones, he added.
Online recharge market
India has over 900 million mobile connections, out of which only 600 million connections (both prepaid and post-paid) are active. "Around 75 per cent of the prepaid connections are in the urban market, out of which less than 2 per cent users opt for online recharging. Hence, the scope seems huge and it will only increase with time," said Shah.
He also added that the total number of transactions being done across recharge sites lie in the 4 lakh range (which means Freecharge currently holds around 10 per cent of the market share). However, this number will increase to around 20 lakh transactions a day by 2016.
Freecharge locks horns with a number of players in the recharge space "the prominent ones being Rechargeitnow and Paytm. Then there are JustRechargeIt; One Mobikwik Systems Pvt Ltd that operates mobile, DTH and data card recharge services provider MobiKwik; Saholic.com, the e-commerce portal owned and operated by Spice Online Retail Pvt Ltd that has started providing mobile and DTH recharge services, and Spice Digital, the digital media arm of the Spice Group, which also has an online recharge service called Spice Deck.
Also, compared to Freecharge, we have found Rechargeitnow.com to be more user-friendly as it also provides tariff details and popular recharge amounts â€“ making it more convenient for customers.
"As of now, Rechargeitnow might be better than us in the recharge business space. But that's because it has been around for a while and it has always been a recharge company while we are a couponing company that has entered the recharge business," said Shah.
What's in store?
Going forward, Freecharge is looking to up the ante by adding a number of features to the site. For instance, apart from providing details on popular recharges, the company will be offering a shopping cart as well, enabling users to make multiple purchases (such as a top-up and a SMS pack together) in a single transaction.
Moreover, the startup has primarily invested the funds raised to build its team and technology. As a result, we can expect to see a Freecharge mobile app for the Android platform next month, followed by apps for other platforms. The company will also start marketing in a big way, once all the features are in place and ready to use.
"Although most of the recharge businesses look alike now, going forward, you will see them evolve and differentiate in their offerings. My guess is while Rechargeitnow will remain a recharge company, Paytm will become a payments company and we will further strengthen our identity as a marketing firm, using the recharge medium all the time," concluded Shah.
(Edited by Sanghamitra Mandal)