1Mby1M Deal Radar 2010: Online Recharge Services, Gurgaon, India

Coverage of NASSCOM’s 2010 Emerge 50 continues with Online Recharge Service Private Limited, through its www.RechargeitNow.com is a multioperator Web-based instant pre-paid recharge station. It specializes in delivering next-generation online prepaid recharges in India.

Online Recharge Services/RechargeitNow, based in Gurgaon, near New Delhi, was cofounded by Sharat Jain and Raj Hajela. Jain has more than 25 years of industry experience with Indian and multinational corporations in IT, telecom, and advertising & media. Recent assignments include managing director, Asia South, for Canada-based Teleglobe (Canadian International Carrier) and CEO of Denstu Media India. Hajela manages Estel Technology Private Limited, which provides software solutions and services in the broad domain of e-recharge and m-banking and has relationships with many national and international mobile carriers. The technology for our backend platform is provided by Estel.

According to Online Recharge Services, the business opportunity addresses a market exceeding $18 billion, growing at 35% a year based on the past three years’ CAGR (from industry association data). The breakeven point for business is achieved at market penetration of 0.25%. The sale of the service is both direct online (direct B2C sales through website www.RechargeItnow.com) and off-line in partnership with aggregators that have a significant retail presence. With these partnerships, Online Recharge Services believes it can address all market segments; however, for the B2C business the target audience is urban male youth – this is estimated to be 5% of the total addressable market based on Indian Revenue Service data filtered by urban youth who own mobile phones, have access to the Internet, and have a bank account or credit card.

The company relies on a low-capex, low-opex business model. It earns commission on the sales of recharges and has direct distribution relationships with almost all of the Indian mobile and direct-to-home satellite television operators. Prices are set by the operators, which include Airtel, Idea, Aircel, Tata Indicom, Vodafone, Virgin Mobile, BSNL, Docomo, Tata Sky, and others.

Competition was largely driven by operator-owned sites, banks, and payment gateways. Recharge was not a core application for any of these options. The primary competitors are mChek, a mobile commerce player whose CEO, Sanjay Swamy, I interviewed in 2008, and Oxicash, a wallet-based payment solution provider, both players were payment gateways offering many services, recharge being one of them. In all cases, the user was tied to a particular payment option. Other competitors are fastrecharge.com, onestoprecharge.com, and ezrecharge.in. The company competes on the ability to support multiple payment systems and on ease of use.

Online Recharge Services says it was the only site offering multiservice, multioperator instantaneous e-top up for mobile and DTH through its relationship with operators and a back-end platform with direct integration to more than 15 operators. It also offers multiple payment options that include credit cards, debit cards, net banking from 38 banks, and cash cards. This was a change from the existing options, which often offered only PIN-based recharge with limited payment option. Online Recharge Services did its promotion through SEO & SEM using Google Network at a minimal operating cost.

Online Recharge Services has taken a total of $960,000 in debt and equity funding from August 2008 through September 2010. The founders say they now need money to launch new businesses and accelerate the growth of existing business. The ideal investor at this stage will be a PE fund. Revenues are around $5 million, and Online Recharge Services expects that they will be $26 million for the fiscal year ending March 2011. The company reached break-even in October. It has about 943,000 registered users and about 34,000 unique visitors daily.

Looking ahead, the founders want to grow the existing business in India as well as other international territories where this opportunity exists and develop ancillary businesses on the strength of existing technological skills and the target audience. The exit strategy is straightforward: an IPO.

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Deal Radar 2010: iWeb Technology Solutions

This segment is a part in the series : 1Mby1M Deal Radar 2010